Dutch transaction - GO government guarantee

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by a searcher from INSEAD
in London, UK

3yrs ago

Dutch transaction - GO government guarantee

Signed an LOI on a Dutch distribution business late last year.

The company does 30M revenue, 2.5M EBITDA.

Now looking into bank financing for 50% of the enterprise value.

None of the traditional Dutch banks propose to make use of the GO 50% government guarantee scheme. Instead they all opt for the MBKB guarantee that requires to provide a personal guarantee to the amount of 25% of the outstanding amount.

Does anyone have experience in this field ? Knows how to convince banks to drop the personal guarantee ?

1 Like

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reply by a searcher 3yrs ago
from INSEAD in Bussum, Nederland

So I learned the following, sharing here so that others can potentially piggy back off this.

As you know, there are two systems under which the state is willing to provide guarantees, the GO and the BMKB. Under the GO the state will guarantee up to 50% and under the BMKB the state will guarantee up to 90%. I learned that under the scheme it is a legal obligation of the lenders to require a personal guarantee so that in the event of default some of the 90% is offset. I am not sure how it is under the GO scheme, but similar I would presume. So the bad news is that there is no way around the personal guarantee. In that respect very interested in Robin's experience (are these loans provided under the aforementioned schemes?)

As for a solution: there are alternative lenders out there (e.g. private debts funds) that do not require a personal guarantee, but this will impact interest rates (8-9% I have been told, not verified). My debt colleague has a contact that operates in this segment, happy to chase for the contact if you are keen.

reply by a searcher 3yrs ago
from INSEAD in Bussum, Nederland

I forgot to mention: it appears you do not meet the requirements for the Go scheme as I understand the company needs to meet the small company requirements as set out in Book 2 Civil Code (need to fulfill 2 of the following three criteria: assets less than 6m, turnover less than 12m, fewer than 50 employees, see art 2:396 BW for details).

Finally, given the margins I suspect your working capital needs are significant and you may need to put in place a revolver to replace the existing one. If so, perhaps you should make this part of the debt package with the lender.