wisconsin private debt program criteria

SENIOR DEBT FINANCING

Middle market companies with:

  • Revenue between $30 million and $750 million

  • Need for capital for expansion/general corporate purposes

  • Good track record and competitive position, operating at least five years

  • Experienced and motivated management team with vision

  • Significant fixed assets (desirable)

  • Strong capitalization

  • Investment grade credit profile

Typical Senior Debt Structure

  • Fixed interest rate linked to Treasuries and public bond yield spreads

  • Senior secured or unsecured position

  • Maturity of 7 to 15 years (rate fixed for life of loan)

  • Some amortizing payments (flexible to company’s cash flow needs)

  • Penalty for early prepayment

  • Minimum loan of $5 million; maximum of $50 million

 

SUBORDINATED DEBT FINANCING

Small to middle market companies with:

  • Revenue between $15 million and $150 million

  • Need for capital for growth/leveraged buyouts, management buyouts or recapitalizations including ownership recapitalizations and special situations (no turnarounds)

  • Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) greater than $2 million

  • Competitive advantage/niche

  • Experienced and motivated management team with vision

  • Viable exit strategy

Typical Subordinated Debt Structure

  • Five-year loan; subordinated to senior debt

  • No amortization

  • Current (cash pay) coupon fixed

  • Accruing coupon PIK (payment in kind) (fixed)

  • Warrants or success fee

  • 2% commitment fee

  • Minimum investment of $3 million; maximum of $15 million

Interest rates and other terms reflect current market terms for similar loans. SWIB's loans are well suited for financing fixed assets or refinancing existing debt. Loans are sometimes used to acquire another business or to buy out a shareholder. The loans are not suited for short-term uses, such as financing inventory and receivables or routine seasonal operating expenses. The fixed assets of the business are often used as collateral. In some cases, a parent corporation may guarantee the loan. In other cases, a personal guarantee of the owner or major shareholders may be appropriate.

 

Borrowers are required to pay SWIB’s legal costs for making the loan and other costs, such as environmental assessments or appraisals, as needed. SWIB does not charge an application fee and does not generally charge a commitment fee (the exception being with a subordinated debt investment where a commitment fee is charged). SWIB may also charge a commitment fee if the borrower does not want to draw down the loan proceeds when the loan agreements are signed.

 

SWIB welcomes the opportunity to review requests for long-term loans to Wisconsin companies. Interested parties should contact the Investment Board to determine what additional information will be necessary for consideration of a private placement loan request.

 

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