SOP 50 10 8 and Minority Investors

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by a searcher from George Washington University
in Milton, FL 32571, USA

10mos ago

SOP 50 10 8 and Minority Investors

Has the appetite of minority investors decreased with SOPredactedrequiring a personal guarantee? I feel like this is a deal breaker for many who would have previously invested. What is everyone's experience? Has this killed any of your deals?

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reply by a professional 10mos ago
from University of Michigan in Detroit, MI, USA

^redacted‌, ^redacted‌ is correct. If it is an 100% buy out, minority investors (less than 20%) will not need to PG the loan. The rule you are referring to only applies to partial changes of ownership. And yes, in that situation it is making those deals harder to close.

reply by a professional 9mos ago
from University of Virginia in Holmes, NY 12531, USA

Spot on, the rule changed things for sellers rolling over >0%-<19.99%. Do note that there are some iterations, a small minority seller may be asked to give an “unconditional limited PG” - for instance, just closed a deal in which seller retaining <1% had to PG the entirety of the purchase price (in addition to buyer, of course) but provided no defaults, the limited PG lapses after 24 months (technically, with bank approval, not to be unreasonably withheld). And yes, causing much confusion amongst all parties. In the same deal, the lender repeatedly sent the seller a full blown unconditional PG, they had trouble even nailing down the right form (that should be *very* atypical). Certainly added some effort in giving the seller comfort on the structure. Always glad to discuss redacted