What collateral secures the Management Recruiters' term loan?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
The term loan is scheduled to mature on June 29, 2036 and bears interest at a variable rate equal to LIBOR plus a margin of 2.0%. At December 31, 2022 the effective interest rate was approximately 6.4%. The term loan will be paid in equal monthly installments based upon a 15-year amortization of the original principal amount of the term loan, provided that any remaining principal balance is due and payable in full on the earlier of the date of termination of the commitments on the line of credit and June 29, 2036. The term loan is collateralized by all real property owned by us.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the term loan with Truist Bank is secured by specific assets. The term loan is collateralized by all real property owned by Management Recruiters.
Additionally, the obligations under the Credit Agreement are secured by substantially all of the assets of the company, including accounts and notes receivable, intellectual property, and real estate owned by HQ Real Property Corporation.
Prospective franchisees should be aware that these assets serve as security for the loan. If Management Recruiters were to default on the term loan, the lender would have a claim against these assets. This arrangement is typical in corporate financing, where lenders require collateral to mitigate their risk.