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June 15th, 2021

Coup De Grass

Coup De Grass. In the summer before eighth grade, at the ripe age of twelve, I was not eligible for NYS working papers required to seek a regular hourly job. My father suggested I find an alternative. Since I was already mowing our small lawn and pulling weeds, I thought I might be able to use lawn work, my sole marketable skill, as the alternative. All of the houses on our street had been laid out on a grid on a farmer’s former field in quarter acre plots. I began knocking on doors to see which families would like to outsource their lawn mowing. Virtually all the lawn mowing then was done by pushing a power mower around the property. The first customer hired me. I was thrilled, but quickly realized I would need a lawn mower and the working capital to pay for gas. The second customer worked in the construction business and had many power items in his yard, one of which was the only sit-down lawn mower I had ever seen. He hired me on a negotiated basis. Instead of $4 per week, he would pay me $50 for the 25 week season, but he would throw in use of his sit down lawn mower and free gasoline from his construction business. I gleefully accepted his offer as my two main challenges were now solved. In addition, being offered a chance at twelve to drive a machine with a gearshift made me feel like Jeff Gordon. I eventually signed five customers; three consecutive lots on one side of the street and two on the other which permitted me to cut large consecutive rows as I crossed lawn borders in my fescue empire.

A day after I completed my first week of mowing, the special requests from the customers began. Three of them wanted the lawn cut north/south instead of east/west, which ended my highly efficient long row driving plan. Two of the customers did not want a power lawn mower within five feet of any of their newly planted trees and required a hand-powered mower be used. One customer sold their home and decided to replace their lawn with small stones. Another customer left after a month when their grandson offered to cut their lawn. August heat hit upstate New York and cutting was reduced to twice a month. The season ended and all customers were happy.

Not until participating in our first clubbing together of a senior bank deal did I realize how aptly I had been prepared by my summer work. Clubbing, a loan syndication done with lenders the firm knows, is an efficient, comfortable method. Initial calls made to measure lender interest, much like my inquiries for lawn customers, are met with great enthusiasm. Post the early excitement, reality starts to dampen the fervor. Early concerns usually include “the leverage is too high and the interest spread is too low.” At this point, a few lenders often suggest they cannot participate in the loan. Industry questions or concerns then arise. One of our favorites was in connection with our thousand gallon plastic tank manufacturer business where a lender’s legal department required a lengthy discussion to prove it was not a cannabis business. Another was a purchase for $300 MM from a lender who owned the company. The lender agreed to “take back” $40 MM of the purchase price in senior debt. At the closing, the lender revealed they had neglected to get the $40 MM approved. We kept the $300 MM deep in our pockets until the world’s fastest approval appeared. Eventually, a lender with excess capacity agrees to terms and takes the lead position. Others quickly follow to complete the club, often leading to an oversubscribed offering. Small allocations are offered to the lenders who originally said they could not participate. Their reluctance now morphs into disappointment about their skimpy allocation. The deal closes. A dinner is held. Lucite door prizes abound and we are on to the next club.

I’m Rob Morris and I approved this blog.

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