MidCap Financial Services is marketing $251.7 million securitization of loans to life sciences and real estate companies.
The transaction, Elm 2016-1, will issue two senior tranches, a $25 million floating-rate tranche and a $195.2 million fixed-rate tranche, both rated single-A by Kroll Bond Rating Agency. There is also a $31.5 million, fixed-rate subordinate tranche rated triple-B. All of the notes have a legal final maturity of June 2025.
The notes are backed by 35 loans to totaling $314.6 million; the majority, 85.3% will be to companies in various life sciences sectors; the remaining 14.7% will be to real estate companies.
Guggenheim Securities is the sole structuring advisor and sole book-running manager.
During the initial, 24-month period, excess funds from principal collections may be used to acquire additional collateral.
Although the collateral is highly concentrated in a single industry, Kroll takes some comfort from the fact that there are various subsectors, such as drug discovery and development, drug delivery, medical devices and equipment, biotechnology tools, and specialty pharmaceuticals that have different fundamentals that are not highly correlated. Additionally, individual technologies within a subsector are typically uncorrelated.
The credit characteristics of the pool are similar to those of other recent securitizations of loans to life sciences companies, according to the rating agency. The weighted average obligor loan-to-value ratio of the pool is approximately 22.5%. The weighted average original term to maturity is 51 months. The loans are structured with initial periods ranging from six to 18 months during which borrowers pay only interest, followed by 24 – 48 months of monthly amortization.