BarbriSFCourseDetails
  1. keyboard_arrow_leftBack

Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Thursday, September 7, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will examine the unique characteristics of recurring revenue financing (RRF) and the issues lenders and borrowers should consider in structuring recurring revenue transactions. The panel will also discuss how to address the conversion of such transactions to more conventional earnings-based financing in the financing documents.

Faculty

Alexandra E. Ciganer
Attorney
Troutman Pepper Locke LLP

Ms. Ciganer is an associate in Troutman Pepper’s Technology and Venture Lending practice in Los Angeles, Orange County and San Francisco. She has a broad range of experience representing commercial banks, noninstitutional lenders and private and public corporate borrowers in secured and unsecured lending transactions with an emphasis on bilateral and syndicated capital call lines of credit and subscription based credit facilities, asset based loans, life science lending transactions, energy resource technology credit facilities, acquisition financing arrangements, and equipment financings. These transactions involve public and private technology companies, venture capital and private equity funds, life science and biopharmaceutical companies, and high net worth individuals.

expand_circle_down Expand to View Full Bio expand_circle_up Collapse Bio
Alex Cabe
Attorney
Troutman Pepper Locke LLP

Mr. Cabe represents institutional clients in secured and unsecured commercial financing transactions. These transactions include a range of borrowers such as public and private corporations, life science and technology companies, venture capital funds, real estate investment funds, and other private equity firms.

expand_circle_down Expand to View Full Bio expand_circle_up Collapse Bio
Justin A. Wood
Partner
Troutman Pepper Locke LLP

Mr. Wood represents lenders and borrowers in all aspects of financing transactions, including structuring, documenting, negotiating, amending and working out term and revolving credit facilities, syndicated credit facilities, asset-based loans, debtor-in-possession financing, high yield notes offerings, and acquisition financing. His clients include public and privately held companies across a range of industries, money-center and regional banks, private equity sponsors, and emerging growth companies. Mr. Wood’s experience includes advising companies on routine corporate and commercial law matters, private equity sponsors on acquisitions and leveraged recapitalizations, multinational corporations on cross-border financings, and both lenders and borrowers in turnarounds, workouts and restructurings.

expand_circle_down Expand to View Full Bio expand_circle_up Collapse Bio

Description

Emerging companies with positive revenue growth but high growth expenses, such as development costs, are often unable to achieve positive EBITDA and cannot obtain debt financing based on traditional working capital borrowing base or cash flow underwriting. For those companies and their prospective lenders, RRF is a possible solution. Private equity sponsors may also utilize recurring revenue of target companies to finance acquisitions. Finance counsel should have a thorough understanding of the structure, risks, and nuances associated with RRF.

The essence of RRF is that borrowing base criteria can be based on recurring revenue that meets tailored eligibility criteria. Typical financial covenants are based on maintaining recurring revenue growth and liquidity levels rather than EBITDA-based ratios. Financial covenants may also convert after time to more customary financial covenants in the form of EBITDA-based ratios (e.g., leverage ratio or fixed charge coverage ratio), along with the possibility for a reduction in the interest rate. Although RRF facilities may be used to finance acquisitions, they are not often highly leveraged, so significantly higher equity contributions may be required from a private equity sponsor seeking RRF than with traditional leveraged financing in the acquisition context.

Equity cure rights may be available, with proceeds generally applied to pay down existing loans to achieve required financial covenants outlined in the documents. Incremental facilities may also be included.

Listen as our authoritative panel discusses the key deal points and structuring nuances of RRF.

Outline

  1. RRF as an alternative to traditional ABL borrowing base revolver for growth companies and PE funds seeking working capital or to acquire growth companies
  2. Borrowing base formulas: eligibility criteria and churn
  3. Payment features: interest, amortization
  4. Recurring revenue and liquidity covenants
  5. Conversion to EBITDA-based financial covenants
  6. Other structural features

Benefits

The panel will review these and other important issues:

  • What debt financing options are available to companies that do not have earnings?
  • How can recurring revenue be used as a basis for pre-EBITDA debt financing?
  • How has RRF been used in connection with acquisitions? What percent of the capital stack does it represent?
  • What are the typical parameters for converting the loan to a more conventional EBITDA-based financing?