A couple of points from a former 25yr+ banker that lent money for leveraged deals to private equity groups and to fortune 500 companies:
1. Dean should of stuck with the life insurance story. I have actually seen them work for such a situation. I worked on two and they never came to fruition, but the structure is legit.
2. The Standby Letter of Credit deals are viewed, in the banking community, on the same level as the Nigerian with a rich uncle that passed ....
3. If the deal was so good, the first lower rated Trust Company, which is essentially guaranteeing payment, would have lent the money instead of issuing its L/C to another Bank that is AAA rated. BTW, I don't know of a bank, in the US, that is triple AAA rated. Not JP Morgan, Citi, BofA, Wells Fargo etc. GE Capital may be still AAA rated.
4. Banks would not take a $100MM exposure, even triple AAA. They would want to syndicate the risk. Particularly, if the risk is to a lesser rated Trust Company (investment grade or not).
5. I dont know of any "real" bank that would be agree to such a deal and I have worked at BofA, Citi, and JP Morgan. The brokerage houses (Goldman, Morgan Stanley etc.) wouldn't do it as there is not enough yield.
6. What ever happened to the $10MM line of credit?
7. If Deano is going to close acquisitions tomorrow or next week, he has to have more than a LOI. If would need an executed Merger Agreement or Asset Purchase Agreement. And if any were publicly traded, there would have to be a shareholder vote.
8. I would also assume that these companies have there own credit facilities that would have to re-negotiated or paid off (more money in addition to purchase price).
9. Lastly, even if Deano was buying two $100MM revenue companies, he would probably have to file to a Hart Scott Rodino form.
This is why I think it is a scam, but a lucrative one for flipping. GLTA
