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Finance for a Hole in the Ground

Monday, August 21, 2017
Borrower   A landfill operator in Milton Grove, Pennsylvania.
Loan   A one-year $8 million loan at 15%.
Collateral   The loan was collateralized by an assignment of a land lease and a first mortgage lien on the underlying 127 acres of land in Milton Grove, Pennsylvania which includes a 78-acre landfill, plus liens on improvements to the site (buildings, fence, tanks), machinery on the site and a 9.9-acre out-parcel.
Guarantors   The loan was guaranteed by the principals of the landfill operator, and another waste management company in which the principals had an interest.
Purpose   The loan enabled the borrower to buy the landfill from its previous owners. The borrower planned to take the ready-to-go, nearly empty landfill (i.e., at the beginning of its useful life) which was permitted for 3.1 million cubic yards of waste and get a minimum of $10-20 per yard for filling it
Exit strategy   The borrower planned to repay the loan out of the proceeds of a Municipal Bond offering.
Outcome   The loan (after a period of default) was repaid in full out of the proceeds of a re-financing. The borrower later went bankrupt, and the subsequent lender was not repaid in full, and the guarantors suffered substantial losses.




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