Thursday, June 21, 2018

Popular Mezzanine Fund, a new source of capital for eligible businesses in Puerto Rico

By on December 21, 2017

Small and medium-sized businesses in Puerto Rico in need of capital to grow organically or through acquisitions, among other things, have a new financing alternative in the Popular Mezzanine Fund.

Mezzanine capital, or mezzanine debt, typically bridges the gap between senior debt and equity capital and is generally considered one of the highest-risk forms of debt. Moreover, this type of debt may also be an alternative for companies without access to traditional bank financing channels.

Gian Piovanetti, Vice President with the Investment Banking Division of Popular Securities, explained that the Popular Mezzanine Fund, recently capitalized by Banco Popular, aims to be an alternative source of financing for eligible local small and medium-sized businesses seeking between $1 million and $10 million in capital for their business needs.

“We are not referring to start-ups, or companies that need equity. Our focus is on experienced businesses that have a higher risk profile than what is generally seen in traditional lending arrangements. The fund is industry-agnostic; all businesses in Puerto Rico with growth opportunities that need financing can apply,” explained Piovanetti.

He added that, due to the risk profile of this type of financing, the interest rate tends to be higher and is evaluated based on the economic conditions of the business and the financing structure.

Popular Securities and New York-based Enhanced Capital are the co-managers of the fund. Enhanced Capital has a 17-year history of structuring and managing these types of mezzanine debt funds.

“This is a new source of capital which was not available in Puerto Rico until now, and we wanted to partner with a knowledgeable firm to benefit from their experience,” stated Piovanetti.

The focus of the new fund is on existing niche-market companies with an opportunity to grow their business through acquisitions or organic expansions. In the past four weeks, several companies have been evaluated among which some are close to receiving a final decision.

“For example, one of the companies we are evaluating needs capital urgently to finish projects that already have purchase orders,” Piovanetti added.

The launch of this fund fills an important need common to businesses in Puerto Rico after the passage of hurricanes Irma and Maria.

“We continuously observe good opportunities in various industries. The energy sector, for example, offers a high growth potential in the current environment. In Popular, we remain committed to Puerto Rico and, now more than ever, we want entrepreneurs and businesses with growth opportunities to know that they have alternatives to obtain capital,” said Piovanetti.

The fund may also be an option for companies that may need to restructure their debt and capital profile.

“For example, there are many family businesses with a second generation or existing management on track to take over the business, thus needing to restructure their capital so that the outgoing generation may monetize its investment without jeopardizing the transition to the new management,” concluded the executive.

It is important to emphasize that all fund investments must comply with the requirements and investment objectives of the fund and other applicable requirements.

To learn more about the Popular Mezzanine Fund, including whether your business meets the investment requirements applicable to the Fund, you may call 787-766-6609 or 787-758-7400.

Subject to credit approval. Certain conditions apply. The Popular Mezzanine Fund (the “Fund”) is a private equity fund organized under the Puerto Rico Private Equity Funds Act and a subsidiary of Banco Popular de Puerto Rico. The primary purpose of the Fund is to provide customized debt financing solutions to privately held companies organized and engaged in trade or business in Puerto Rico that comply with the requirements of the federal Community Reinvestment Act (the “CRA”). All applications are subject to prior approval and must comply with all applicable CRA requirements, Fund investment objectives and any other applicable requirements.

 

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