A Cincinnati equipment finance company has completed a deal to raise $75 million to support its rapid growth.
Blue Ash-based Verdant Commercial Capital closed on the subordinated debt arrangement with Värde Partners, an alternative investment firm founded in Minnesota and with primary offices in Minneapolis, New York, London and Singapore.
Verdant provides financing to dealers who sell equipment. The additional debt will enable dealers to sell more equipment because they can provide more financing to customers.
The $75 million debt facility enables Verdant to draw down only what it needs. It’s using less than half of the total right now, Verdant CEO Mike Rooney told me.
That supports the company’s growth. The deal will backstop hundreds of millions of dollars of growth on Verdant’s balance sheet. For every $100 million on its balance sheet it needs $15 million in capital, Rooney said.
“We’re growing up as a company and we want to start growing the balance sheet,” he said.
Verdant is on a breakneck growth pace. Its loan and lease originations have soared 60% so far this year compared with the same period a year ago, Rooney said. That’s well above its original projection of 37% growth from last year’s total loans and leases originated of $400 million.
“We won’t end the year up 60% because it’s hard to imagine we’ll keep up that pace,” Rooney said. “But we’ll certainly exceed our forecast by quite a bit.”
It has likewise added people at a fast pace. Verdant has expanded its employee roster by 15 since the beginning of the year and now has 76 employees.
Rooney told me in March the company’s goal is to reach $1 billion in annual originations in the next three to four years.
Subordinated debt is akin to raising equity except it doesn’t dilute the owners’ stake in the company, Rooney said. It’s listed as equity on the balance sheet.
“If a company has the cash flow to pay it off with the interest, it’s great,” he said. “Most young companies don’t have that kind of cash flow but we do.”
Beyond the specific benefit of fueling Verdant’s growth, the deal with Värde Partners is important because of what it says about Verdant’s ability to attract institutional capital.
“They’re an international company,” Rooney said. “For a bunch of people from Cincinnati to get the attention of international investment companies is obviously a good thing. They can invest anywhere in the world and they made the decision to invest in us.”
Värde manages more than $13 billion and has invested $90 billion since it was founded in 1993.
Verdant arranges financing primarily through six divisions: industrials; manufacturing; specialty vehicle; golf, sports and entertainment; renewables and energy efficiency; and technology and office automation.
The growth has come from expanding the business in those areas. In some cases it has added groups of experts in those areas, such as bringing in an alternative energy group last year to add that field to its areas of expertise.
It funds transactions ranging from less than $25,000 to as much as $100 million. In addition to its Blue Ash headquarters, Verdant has offices in Dallas, Detroit, Los Angeles. and Minneapolis.
By Steve Watkins – Staff reporter, Cincinnati Business Courier
Reprinted with permission.