[sheet: Cover]

[sheet: Cover]
Field | Value
Document Title | Borrowing Base Analysis Memorandum — Collateral Sensitivity and Advance Rate Analysis
Date | April 8, 2022
Matter Number | 1011-00001
Prepared By | Lisa Morrow, Working Associate, Banking & Finance / Daniel Obi, Lead Associate, Banking & Finance
Reviewed By | Stephanie Okafor, Responsible Partner, Banking & Finance
Distributed To | Raymond Chu, General Counsel, Meridian Consumer Brands LLC; Patricia Delgado, CFO, Meridian Consumer Brands LLC
Re | Proposed $40,000,000 Asset-Based Revolving Credit Facility — Meridian Consumer Brands LLC (Borrower) / Ridgeline National Bank, N.A. (Prospective Lender)
Ridgeline Deal ID | ABL-2022-0417
Classification | Attorney-Client Privileged / Attorney Work Product
Governing Law | New York
Borrower Entity | Meridian Consumer Brands LLC, a Delaware limited liability company
Borrower EIN | 84-3291057
Borrower HQ | 401 West 33rd Street, Suite 1200, New York, NY 10001
Prospective Lender | Ridgeline National Bank, National Association, 200 Tryon Street, Charlotte, NC 28202
Lender's Counsel | Whitfield Ames LLP (Catherine Royce, Partner; Benjamin Nakamura, Associate)
Existing Lender | Greystone Capital Finance LLC (Loan Ref: GCF-MCB-2019-1215)
Appraisal Firm | Bellweather Appraisal Group LLC (Lead Appraiser: Thomas Varga)
Auditors | Pemberton & Locke CPAs LLP (Engagement Partner: Diane Sorrento)
[sheet: Borrower Overview]
Financial Metric | Value | Source / Notes
FY2021 Revenue | $185,000,000 | Approximate; per MCB audited financials (Pemberton & Locke CPAs LLP)
FY2021 EBITDA | $22,400,000 | Approximate; per MCB audited financials
Total Assets | $142,000,000 | Approximate; per MCB balance sheet
Eligible Accounts Receivable (Initial) | $38,000,000 | Per MCB aging schedule as of Jan 2022; >90-day aging threshold
Eligible Inventory at Cost (Initial) | $54,000,000 | Per MCB inventory records as of Jan 2022
Equity Sponsor | Brindoval Partners Fund III, LP | Acquired MCB in 2019; enterprise value ~$210,000,000
Existing First Lien Term Loan — Greystone Capital Finance LLC | $75,000,000 | Dated December 15, 2019; maturing December 2025
Greystone Outstanding Balance (Jan 2022) | $61,500,000 | Approximate; per MCB records
Proposed ABL Commitment | $40,000,000 | 4-year maturity; anticipated closing Q2 2022, maturing Q2 2026
Proposed Interest Rate | SOFR + 200 bps (25 bps SOFR floor) | Step-down to SOFR + 175 bps if avg. quarterly availability > $20,000,000
Unused Line Fee | 37.5 bps per annum | On undrawn portion of commitment
Upfront Fee | $200,000 | $40,000,000 × 0.50% = $200,000
[sheet: Initial Borrowing Base]
Component | Gross Amount | Eligibility / NOLV Adjustment | Adjusted Amount | Advance Rate | Borrowing Base Contribution
Eligible Accounts Receivable | $38,000,000 | 100% (>90-day aging exclusion applied) | $38,000,000 | 85% | $32,300,000
Eligible Inventory (at Cost) | $54,000,000 | 70% NOLV (per Bellweather preliminary estimate) | $37,800,000 | 65% | $24,570,000
Total Borrowing Base | $56,870,000
Proposed Commitment | $40,000,000
Excess Availability | $16,870,000
Excess Availability as % of Commitment | 42.2%
[sheet: Revised Borrowing Base]
Component | Gross Amount | Eligibility / NOLV Adjustment | Adjusted Amount | Advance Rate | Borrowing Base Contribution
Eligible Accounts Receivable (Revised) | $31,000,000 | 100% (>60-day aging exclusion per Ridgeline revised threshold) | $31,000,000 | 85% | $26,350,000
Eligible Inventory at Cost (Revised) | $42,000,000 | 70% NOLV (per Bellweather; ~$12M seasonal/slow-moving SKUs excluded) | $29,400,000 | 65% | $19,110,000
Total Revised Borrowing Base | $45,460,000
Proposed Commitment | $40,000,000
Excess Availability | $5,460,000
Excess Availability as % of Commitment | 13.7%
[sheet: MCB Counter-Proposal]
Component | Gross Amount | Eligibility / NOLV Adjustment | Adjusted Amount | Advance Rate | Borrowing Base Contribution
Scenario A: MCB Counter (Original Eligibility, 75% Inv Adv Rate)
Eligible Accounts Receivable | $38,000,000 | 100% (>90-day aging threshold restored) | $38,000,000 | 85% | $32,300,000
Eligible Inventory (at Cost) | $54,000,000 | 70% NOLV | $37,800,000 | 75% | $28,350,000
Total Borrowing Base — Scenario A | $60,650,000
Excess Availability — Scenario A | $20,650,000
Excess Availability % — Scenario A | 51.6%
Scenario B: MCB Counter (Revised Eligibility, 75% Inv Adv Rate)
Eligible Accounts Receivable (Revised) | $31,000,000 | 100% (>60-day aging per Ridgeline) | $31,000,000 | 85% | $26,350,000
Eligible Inventory at Cost (Revised) | $42,000,000 | 70% NOLV | $29,400,000 | 75% | $22,050,000
Total Borrowing Base — Scenario B | $48,400,000
Excess Availability — Scenario B | $8,400,000
Excess Availability % — Scenario B | 21.0%
Scenario C: MCB Counter (Revised Inv Eligibility, 90-day AR Restored, 75% Inv Adv Rate)
Eligible Accounts Receivable | $38,000,000 | 100% (>90-day aging threshold restored) | $38,000,000 | 85% | $32,300,000
Eligible Inventory at Cost (Revised) | $42,000,000 | 70% NOLV | $29,400,000 | 75% | $22,050,000
Total Borrowing Base — Scenario C | $54,350,000
Excess Availability — Scenario C | $14,350,000
Excess Availability % — Scenario C | 35.9%
[sheet: Sensitivity Table — Advance Rat]
Inventory Adv Rate \ AR Adv Rate | 80% AR | 82.5% AR | 85% AR | 87.5% AR | 90% AR
55% Inventory | $40,970,000 | $41,745,000 | $42,520,000 | $43,295,000 | $44,070,000
60% Inventory | $42,440,000 | $43,215,000 | $43,990,000 | $44,765,000 | $45,540,000
65% Inventory | $43,910,000 | $44,685,000 | $45,460,000 | $46,235,000 | $47,010,000
70% Inventory | $45,380,000 | $46,155,000 | $46,930,000 | $47,705,000 | $48,480,000
75% Inventory | $46,850,000 | $47,625,000 | $48,400,000 | $49,175,000 | $49,950,000
80% Inventory | $48,320,000 | $49,095,000 | $49,870,000 | $50,645,000 | $51,420,000