The Enhanced Capital Arch Note, provided by the Enhanced Credit Supported Loan Fund, makes holdco, senior, and junior loans to U.S.-based companies supported by a backstop from a financial sponsor (Private Equity funds, VC funds or Family Offices). The team works closely with sponsors to find creative solutions to provide non-dilutive financings to their portfolio companies to finance growth/change in lieu of using equity.
- What is the Arch Note? A Video Explainer
- Solve Sponsor Equity Needs with Non-Dilutive Debt
- Why Sponsors Do a Credit Supported Deal
- Potential Benefits
- Transaction Types
- Company Criteria
- Sponsor Criteria
- Typical Terms
- ECSLF Team
What is the Arch Note?
Solve Sponsor Equity Needs with Non-Dilutive Debt
- Provides non-dilutive debt for equity needs (growth, transitions)
- Allows Sponsors to tap the net asset value of a fund to obtain “off market” debt financing for their portfolio companies
- Unlocks the value of older funds beyond their investment period
How we do it:
- Loans supported by unsecured fund-level guarantee
- No undrawn LP capital required
Why Sponsors Do a Credit Supported Deal
- Use debt to finance equity risk
- Support portfolio companies at the end of a fund's investment period
- Support a negative EBITDA portfolio company
- Bridge to an exit
- Enable “stretch” debt financing, fund an acquisition or recap/dividend
- Leverage a sponsor’s portfolio value, not undrawn capital commitments, to obtain capital for a portfolio company
- Free up undrawn capital pledged to banks
- Leverage deployed equity and increase ROIC to LPs
- Stretch remaining capital reserves
- Covenant-lite for borrower and limited call protection
- Borrow anywhere in the capital structure
- Partial PIK interest
- Growth capital
- Acquisition financings
- Positive or negative EBITDA
- Any industry
- Headquartered in the U.S.
- Uncalled capital commitments not necessary
- Must have raised more than one fund (for Private Equity funds or VC funds)
- $50 million minimum assets under management
- Minimum number of outstanding portfolio companies
- Target Investment Size: Target $5–80 million
- Tenor: 9 months – 5 years
- Type: Holdco, Senior or Subordinated
- Target Coupon: ~11% (cash + PIK)
- Borrower: Fund or Portfolio Company
- Amortization: None
- Financial Covenants (Portfolio Company): None
- Negative EBITDA: Permitted
- Industry Restrictions: None
Douglas A. Cruikshank Managing Partner – Credit Supported Loan Fund, New York City
Doug serves as a Managing Director of Enhanced Capital and has over 20 years of experience in banking and investment banking. Prior to joining Enhanced Capital, Doug was a Managing Director at Barclays and Lehman Brothers covering financial sponsor clients. Prior to that, he worked at Credit Suisse and JP Morgan doing leveraged finance, bank lending and private placements. Before earning his MBA, Doug was a middle market loan officer at Manufacturers Hanover Trust Co. after successfully completing its 9-month credit training program.
Doug earned his B.A. degree from Princeton University and his MM/MBA degree from the Kellogg School of Management at Northwestern University.
Rafael N. Castro Senior Principal – Credit Supported Loan Fund, New York City
Mr. Castro is a Senior Principal of Enhanced Capital and is responsible for sourcing, executing and monitoring debt investments. Prior to joining Enhanced Capital in 2011, Mr. Castro was Managing Director of Velocity Capital Advisors LLC, where he originated and managed a portfolio of corporate debt. Previously, Mr. Castro spent four years at Ableco Finance LLC, the private lending arm of Cerberus Capital Management, L.P., where he managed a $450 million special situation loan portfolio. Mr. Castro also worked in the Leveraged Finance Group at CIBC World Markets and LabMorgan, JP Morgan’s e-finance venture capital group. Mr. Castro graduated from Harvard University in 1997 and received an M.B.A. from Columbia Business School in 2004.
Rich Davis Senior Principal – Credit Supported Loan Fund, Connecticut
Rich serves as a Senior Principal of Enhanced Capital. Prior to joining Enhanced Capital, Rich was a Vice President at GarMark Partners, where he focused on investing a $330 million fund in private debt and equity investments. Previously, Rich as an Associate at Wind Point Partners and a Senior Investment Banking Analyst at RBC Capital Markets. During business school, Rich was a Summer Associate with Wynnchurch Capital.
Rich received a MBA from the University of Chicago and a BS from the University of Illinois. Rich holds the Chartered Financial Analyst (CFA) designation and serves on the board of the Chicago Private Equity Network (CPEN) in New York.