While on the Topic of Restructuring….

Normally, in these difficult times, sale-leaseback transactions would be plentiful. However, lacking leverage and a continuing gap between sellers and buyers’ expectations, buyers remain on the sidelines. We would hypothesize a minimum 15% cash-on-cash return is required by investors for an all-equity deal, but, with leverage, the number is more likely 25%, if not higher. To bridge this value gap and get the deal done, a very willing seller might want to consider seller’s credit. The seller’s credit would be subordinated to the bank debt and hence, would have no impact on the leverage ratios, the LTV improves, with the asset and related debt disappearing, and there may even be cash coming back.

Finally, based simply upon logic, a cost benefit analysis should tilt in favor of junk bonds

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