Petrogram - Winter 2010 - (Page 11)
Out & About THE INDUSTRY
New Year Petro-Financing Prognostications
Society in every state is a blessing, but government, even in its best state, is but a necessary evil; in its worst state, an intolerable one. —Thomas Paine, 1776
Mark Radosevich, PetroProperties & Finance, LLC
t the time of this writing, the 2010 NACS convention has just concluded, leaving the BPAMA convention as our final trade commitment to the end of the year. This marked my eleventh consecutive NACS and was the first time that I really noticed and appreciated the number of people and level of frenetic activity engaged during the last day of exhibitor set-up. Thousands of people representing Twinkies to fuel dispensers, working across two enormous exhibit halls, preparing for opening day. No other time during the year or amount of words could encapsulate the enormity of our industry or its importance to our economy, than at that very moment. How I wished that the liberal-progressive dogooders in Washington could have been there to experience it for themselves. The convenience store is undoubtedly the focal point of governmental intrusion and the right of everyday Americans to choose how they wish to live their respective lives. With the economy continuing to sputter and unemployment at all-time highs, increased regulation combined with intent to restrict sugar intake, cigarette consumption and driving habits will no doubt have widespread negative ramifications not only to our industry, but to the economy as a whole. As the NACS convention and the many diverse businesses in attendance attest, the petroleum industry is widely interwoven into the fabric of American society more than most folks comprehend or appreciate.
On a bright note, several financial institutions were represented as both attendees and exhibitors. This was the first time since the economic meltdown that lenders looking for larger real estate backed acquisitions or debt refinancing were in attendance. Going into the New Year, it will be interesting to see if they are really “open for business” or simply attempting to gain brand awareness for the future. Although they stated that no deal is too large and that they could directly handle transactions over $100 million in value, we suspect that a deal size of between $10 and $50 million is more realistic out of the gate. It is our intention to flush them out as soon as possible by teeing up some quality loan opportunities and see if they deliver competitive term sheets in a timely manner. With the advent of these new industry-specific lenders, we expect other institutions to become more amicable to financing our industry on both a regional and national level. This should provide a greater number and diversification of buyers of both chains and single unit stores, thereby ultimately enhancing deal flow and values. This will also bode well for marketers on the fence considering exiting the industry or those needing to refinance shorter term or securitized loans that are coming due. Expect to continue to see loan amortizations out to twenty years with a short term of about five years and fixed rates to decline below 6 percent. Adjustable rate terms may also be compelling given the current low interest rate climate. In
all cases, we expect loan to value leverage to remain in the 60–70 percent range, thereby requiring solid borrower equity, and depending upon deal size, personal recourse applying for the duration or a reasonable period of time into the loan. Lender deal sizing will be conservative with a leverage based upon the lesser of the appraised and cash flow value. In the store divestiture arena, we expect the lending environment for single unit buyers to continue to be challenging, requiring continued marketer support in the areas of seller financing, loan guarantees or lease-purchase arrangements to maintain single site values and network rationalization plans. On behalf of the entire PetroProperties & Finance team across the country, we wish everyone in our industry a relaxed and festive holiday season. It is our hope that some semblance of logic will return to Washington next year and that our government will again recognize the importance of our industry and the contributions made by family businesses to our economy. Please feel free to contact us at any time for assistance with deal assessment, financing or any other strategic business challenge. We are sincerely committed to your success. ❍ Mark Radosevich is a strong advocate for the retail petroleum industry. He is president and COO of PetroProperties & Finance, LLC, offering confidential mergers & acquisition representation and growth financing services exclusively to the wholesale petroleum sector. Contact him at 423-442-1327 or at email@example.com.
Table of Contents for the Digital Edition of Petrogram - Winter 2010
Petrogram - Winter 2010
FPMA Salutes Its Patron Members
Cost Savings Is the New Trend
Out & About the Industry: New Year Petro-Financing Prognostications
CITGO Steps Outside the Box
Enviro Corner: Adaptation
Overcoming the Obstacles: Court Finds Cleanup Cost Coverage
A Bad Combination: Drugs & Alcohol in the Workplace
Local Store Marketing for Convenience Stores
Index of Advertisers/Advertiser.com
Petrogram - Winter 2010
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