Finance Monthly - October 2021

as the traditional sources of financing (i.e. banks) prepare to exit their credit facilities with these lower-middle market companies. Have you noticed an increase in Canadian and US middle- market companies’ needs for loans over the past year and a half? We have noticed an increase in Canadian and US middle- market companies’ needs for loans over the trailing 18 months – however, a larger portion of the transactions that we have observed US$1B+ are in non- essential industries, during this unfortunate lengthy pandemic, such as income-producing realty (i.e. hotels, shopping plazas etc.) which experienced an enormous decline in revenue. Furthermore, we have observed $500MM+ of Oil and Gas and Mining (i.e. coal) companies that, even absent a pandemic, are highly cyclical and subject to global commodity risk, which have been further impaired during the pandemic and are seeking rescue capital in the form of equity, mezzanine capital – given that they are term heavy transactions with minimal utilisation – which leads to prolonged cash burn. We are also observing similar subsidies and financial support from the US Government with small and medium enterprises which has provided US banks (similar to the Canadian banks) with some breathing room. This support, which shall run its course shortly, has made some of these SMEs, in need of alternative financing, reactive to the situation when they should be proactively preparing themselves to be transferred into special/distressed account management with the banks. Having said that, we have been fortunate to secure and assist a number of companies that took the proactive approach of seeking alternative financing prior to the conclusion of the government subsidies. How have you, at FrontWell Capital Partners, reacted to this? At FrontWell, we are not reactive, rather we are proactive. We anticipated the economic issues and we fully understood the negative economic impact on lower-middle market companies. We are generalists, as such, we immediately proactively set out to commence direct calling into the US and Canadian traditional industries, banks, alternative financiers (seeking “club” on transactions, active restructuring groups in the large accounting firms as well as the specialty restructuring advisory firms, that we support, where we can clearly identify “cracks in the “We have noticed an increase in Canadian and US middle-market companies’ needs for loans over the trailing 18 months – however, a larger portion of the transactions that we have observed US$1B+ are in non-essential industries, during this unfortunate lengthy pandemic.” Bank i ng & F i nanc i a l Se r v i ce s 32 Finance Monthly.