Broker's Deal Left Unfunded Until Coming to IFC

For more info, contact:

Brian Cascarano
Vice President
(847) 663-6700

bcascarano@
ifccredit.com
A recent transaction for a Texas-based surgery center shows why equipment leasing brokers seeking to fund difficult transactions are usually best served by IFC Credit Corporation.
The transaction came about by a local broker who was working to obtain funding for a surgery center. The center was in need of a new, advanced endoscopic digital video system that would allow the display of high resolution, real-time video of areas inside the human body.  Having this equipment, which cost of over $400,000, would allow the center to provide its patients with a higher quality of medical care.
The center wished to lease the new equipment, with a $1 buyout at the end of term.
The idea sounds simple enough, and if that were the end of the story, the broker could have come to IFC or to a number of other leasing companies, and would likely have been served adequately by either.
As any broker knows, however, a deal is rarely that easy, and as the broker in Texas would find, when the deal becomes more involved, other companies often cannot meet their needs.
On this occasion, inspection of the center’s books showed that most period-end financial results and ratios were trending negatively, which caused some trepidation.
There was additional concern that the center’s cash flow, after distribution of profits to the owners, was not enough to cover scheduled debt maturities and interest charges.
The ownership structure of the center also added to the difficulty in financing the equipment. The ownership was divided between a corporate general partner and a number of individual physicians. The general partner was also a subsidiary of a larger organization.
Navigating the ownership structure to determine liabilities in case of default, other leasing companies wanted the ultimate parent company, which is a significantly larger entity, to issue a guarantee.
The parent company required that the surgical center stand on its own and refused to  issue any guarantees, and the broker found that at that point, the deal could not go through.
Not until he called IFC.
IFC has over 25 years of experience in structuring challenging middle-market transactions.  Building on that tradition, IFC took another look at the center’s financial statements, and came up with a solution.
Diving in deep, IFC factored the center’s Paydex rating, earnings coverage of fixed charges, strong patient referral network, and many other metrics to help determine a better picture of the companies ability to meet commitments. IFC looked at the general partner’s liability, and asked the center to make a change in their partnership agreement to ensure that debt obligations were paid to a particular level before distributions were made to ownership.  Most importantly, IFC was able to offer an agreement which did not require the ultimate parent company to issue a guarantee.
The proposal pleased the center’s owners, and after a long period of frustration and dead-ends with other leasing companies, the broker saw his deal funded by IFC.