Investor FAQ
What controls do you have over your Private Company Partners? What is preventing them from putting more debt on their own balance sheet?
Each Alaris financing is governed by a series of covenants and items requiring our prior consent. Material breach of these items triggers a forced repurchase of our interest. Covenants include financial reporting and basic financial ratios, and consent items include taking on any additional debt, material acquisitions, divestitures or capital expenditures as well as ownership changes.
How much debt can Alaris incur?
At the current time, Alaris' debt facility is approved for 1.5 times our annual earnings before interest, taxes, depreciation and amortization (EBITDA) and is nearly fully drawn at this time. As a conservative, defensive investment vehicle, it is not anticipated that Alaris will ever have a highly levered balance sheet. However, it is our goal to raise capital to partner with more private companies. We need to issue new, non-dilutive equity as well as borrow a small portion of senior debt to fund these new private companies. By using the appropriate amount of debt and equity our cost of capital can come down to a level that will benefit shareholders and prohibit undue risk on our balance sheet.
How much debt do your Private Company Partners carry?
Alaris looks for companies with low leverage in order to protect our annual distributions. At the current time, our Private Company Partners cumulatively debt that is lower than 1 times EBITDA based on their historical earnings.
Are shareholders diluted when Alaris finances a new private company?
When Alaris partners with a new private company, the distributions to Alaris for the twelve months following closing are already known at the time of closing. The yield that we acquire from these private companies will always be higher than our blended cost of capital (being our cost of equity combined with our cost of senior debt) . As such, adding new private companies not only lessens an investor's risk by providing further diversification, it also increases Alaris' earnings on a per share basis. In addition, such transactions typically result in an increase trading float and thus increased liquidity for current shareholders.
How big is the market for Alaris' structure?
The market for non-control private equity investments is significant. Many private business owners who are looking to realize some liquidity on their business would prefer to maintain ownership rather than sell, even a portion, of their business to a third party. The Alaris structure is one of the few options available in the marketplace that offers a "partial" liquidity mechanism for private businesses. Demographically, baby boomers are addressing prevalent issues concerning retirement wealth and generational transfer. Alaris' unique investment structure is ideally suited to satisfy this growing market.