This growth potential is very attractive to many lenders and Full Circle is positioned to take full advantage of this sector’s growth.
“We are a diversified lender across a number of industries including real estate, energy, food, consumer, manufacturing, aerospace, and media – and we will continue to seek this sort of diversity in the marketplace,” said Stuart who continued, “Healthcare is a very large sector of the economy and we have had exposure to the sector. But, we also realize the importance of building a team that possesses specific industry expertise in order to succeed. I’ve known Jon Burklund for about 18 years – we worked together in the past, and Mike Gervais’ reputation was very well known to us. These two specialists bring strong skills to our team – Jon from his investment banking and deal generation side and Mike from his operational, credit and depth of experience lending to the healthcare sector.”
Felton concurs adding, “We look at sectors requiring a degree of specialization in regards to sourcing and underwriting, and where we can earn yields that are outsized relative to the risk of a transaction. As a company, we know healthcare fits this target nicely. But we also understand that success in this sector is reliant upon a significant level of industry lending expertise, such as the expertise Mike and Jon bring to the table. From a business perspective we believe a cultural fit is also critical and we immediately felt very good about both Jon and Mike. As John indicated, it was clear that early their investing and underwriting experience would be a great fit with our team. We also expected there would be great synergies with our other lending areas such as real estate.”
Pieces Falling Into Place
Both Gervais and Burklund were seeking a unique opportunity where they could get to the business at hand immediately versus launching a de novofinance operation.
According to Burklund, Full Circle met this requirement, “Mike and I spent a lot of time reviewing the market. The Full Circle platform is built with a very strong, intelligent and productive team. Mike and I were confident we could start doing business the day after we joined. Additionally, we have found the culture here fosters healthy and open debate, and that will equate to strong growth with targeted credits.”
Gervais agrees saying, “As Gregg and John mentioned earlier, access to capital is critical. When Jon and I looked at this opportunity, we immediately recognized the flexibility a BDC structure provides – especially when compared to my prior experiences in the market. Additionally, the ability to do transactions across numerous asset classes is very attractive and allows us to bring turnkey solutions to healthcare providers – whether it’s asset-based lending, real estate, equipment, or leveraged finance – we can step into each of those roles. I also believe we will be well positioned to take advantage of opportunities created by the increasing number of mergers and acquisitions in the industry. We couldn’t be better positioned to take advantage of the opportunities in the healthcare sector.”
Flexibility and Experience Make a Difference
According to Gervais, there are few lenders with the level of expertise and strong reputation possessed by this team. “It’s our healthcare expertise, lending flexibility and funding stability that sets Full Circle apart from other healthcare lenders in the country. When we sit in front of an operator or a provider and tell them we can do a transaction, they know we can execute. One of the things I have been very impressed with here at Full Circle is the ability and speed at which we can execute transactions.”
From a target market perspective, Full Circle is targeting transactions of $3 million to $10 million, with a hold limit of roughly $10 million; however, the company will do larger transactions when they can team with a partner. And, they expect these ranges to increase over time. Targeted borrowers include hospitals, senior housing, home health and hospice, ambulatory care, diagnostic imaging centers, medical transport, medical equipment, laboratories, behavioral health and physician practices as well as other healthcare related businesses. The group’s deal capabilities are diverse as the group will underwrite asset-based, leveraged finance and cash flow transactions. Gervais expanded on this saying, “We look beyond standard credit quality and also look closely at the quality of the management team as this is critical to us along with consistent cash flow and understanding the direction of the business.”
The company does not employ a rigid underwriting process, and therefore a transaction does not necessarily need to fit into a particular credit box. “If the need for capital is identified, we will build the transaction around that particular need. Therefore many of our deals are tailored to the needs of the particular borrower. We want to see collateral of course as this reduces risk, but we are also prepared to take on cash flow risk,” says Felton who continued “We are also source agnostic, therefore we are sourcing deals directly as well as from the private equity community and various intermediaries that are packaging deals specific to the healthcare industry.”
It’s clear this new healthcare finance source operating under the architecture of a BDC is prepared to offer its unique lending capabilities to what its management team views as an underserved segment – the lower middle market.
In closing Gervais commented, “We are confident we can execute on the plan we presented to Gregg and John and that we will close a significant amount of business in the market that provides solutions across a host of asset classes while simultaneously building a leading platform in the healthcare lending industry.”