Investment Criteria

Typical Investment Parameters

The Peninsula Funds seek to invest in superior middle-market companies requiring capital for an acquisition, expansion or recapitalization. Successful investment candidates typically have the following characteristics:

• Minimum EBITDA of $3.0 million, a history of profitable operations and margins that meet or exceed industry averages;
• A financially motivated and experienced management team with a successful operating record;
• A sustainable competitive advantage in one or more of the following areas: market share, cost structure, distribution channels or product/service quality; and
• A clearly articulated vision for the company, including a realistic strategy and adequate resources to achieve its goals.

The Peninsula Funds employ a generalist investment approach, having invested in a wide range of industries, including among others manufacturing, aerospace, industrial and professional service, distribution, consumer products, retail, information technology, transportation, food processing and packaging companies. The Funds generally avoid investments in real estate, construction, emerging technology, natural resources and highly regulated and/or volatile industries. Financially or otherwise distressed companies are also unsuitable investment candidates for the Funds.

Junior capital investments are structured to balance the transaction’s funding needs, the target company’s capital servicing ability and the investment’s perceived risk-return profile. Typical junior investment terms and conditions for debt and equity tranches are as follows:

Subordinated Debt

• Minimum of $5.0 million, although exceptions for investments promising future lending opportunities are considered.
• Maximum of $50 million, however, loans of even larger amounts are available in conjunction with our limited partners.
• Current interest rate typically of 10–14%.
• 5–7 year stated maturity.
• Investments generally structured with a single principal payment at maturity, or with amortization in the final 2–3 years of the loan.
• Security requirements generally include a second lien on the company’s assets and key-man life insurance on critical management team members.
• A deferred return component, usually in the form of an equity participation or deferred interest, to generate an all-in return on capital commensurate with the unique risks of the investment and the expectations for similar investments in the marketplace.

Preferred/Common Equity

• Maximum of $30.0 million, however, larger amounts are available in conjunction with our limited partners.
• Current or PIK dividend rate of 6–10% on preferred equity. Common equity generally does not carry a dividend.
• Redemption right on preferred equity after 5–8 years via a put option. Common equity investments typically do not have mandatory redemption rights.
• Minority equity holder rights such as dilution protection, board observation/voting privileges and limited consultation and consent rights.
• Investments structured as non-controlling or controlling, depending on the unique requirements of the transaction.