Information on the Target

Alaris Equity Partners Income Trust (referred to as "Alaris") has successfully redeemed its investment in Federal Resources ("FR") through the recent sale of FR to a third-party buyer. This significant transaction was finalized on October 26, 2021, leading to the complete redemption of Alaris' FR Units, alongside the repayment of any outstanding loans. The total proceeds from this operation amount to US$80.9 million, equivalent to CA$101.9 million.

During their six-year partnership, Alaris achieved a remarkable total return of US$75.7 million, equating to an impressive 113% return on investment. This included over US$61.7 million collected in distributions and interest payments since Alaris' initial investment in June 2015, plus the redemption proceeds that exceeded Alaris' invested capital of US$67.0 million by US$13.9 million (20.7%).

Industry Overview in Canada

Alaris operates in the alternative financing and private equity sector, focusing on providing financial solutions to private companies across Canada. The demand for alternative financing solutions has been growing, particularly as traditional lenders tighten their lending criteria in response to economic fluctuations. This trend is further propelled by ongoing market demands for flexible financing arrangements that allow companies substantial operational freedom.

Moreover, the Canadian economy is in a recovery phase following the challenges presented by the COVID-19 pandemic. Many businesses are seeking to stabilize themselves and attract investments that will enable them to scale efficiently. For the private equity and alternative financing industry, this recovery presents vast opportunities to foster growth and innovation across various sectors, including technology, healthcare, and manufacturing.

Within Canada, industries are increasingly recognizing the benefits of partnering with firms that offer equity-like solutions, which can provide both strategic input and the required capital for growth without the constraints typical of traditional financing. Alaris, with its focus on fostering long-term partnerships, is well-positioned to capitalize on this increasing market trend.

Furthermore, as companies in diverse sectors continue to navigate the aftermath of economic disruptions, they are more inclined to seek flexible financial partnerships that can offer them strategic support rather than merely capital. This dynamic has elevated the profile of investors like Alaris who can adapt their offerings to better align with these evolving needs.

The Rationale Behind the Deal

The decision to redeem the investment in FR follows a period of mutual success, confirming the strategic alignment between Alaris and its partners. The flexibility provided to FR through Alaris’ preferred equity structure has allowed for substantial growth, leading to a favorable outcome for both parties in this sale. This transaction not only marks a successful exit for Alaris but also facilitates new avenues for capital deployment to drive further growth initiatives.

Additionally, the financial returns generated from this partnership align with Alaris' objectives of delivering stable cash flows to its unitholders. As Alaris anticipates future growth opportunities, the proceeds from the FR redemption are set to enhance its investment capacity significantly.

Information about the Investor

Alaris Equity Partners Income Trust is recognized for its unique approach to alternative financing, providing capital to private companies in exchange for distributions. Operating through its subsidiaries, Alaris aims to deliver stable and predictable cash flows while backing the growth aspirations of its partners. Alaris seeks opportunities that not only yield financial returns but also establish long-lasting strategic partnerships.

The trust operates on the principle of investing in companies with strong management teams and growth potential, fostering collaboration and innovative financial solutions. Alaris has built a solid reputation in the market, making it a sought-after partner for businesses looking for flexible financing options that allow for operational freedom.

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The recent redemption of Federal Resources by Alaris signifies a well-orchestrated exit, showcasing the trust's successful investment strategy within the alternative equity market. The outcomes of this deal are indicative of Alaris's effective management and its capability to identify growth opportunities that align with its investment philosophy.

Furthermore, with a total return of 113% over the six-year partnership, Alaris has demonstrated a strong ability to generate significant returns amidst fluctuating market conditions. The success of this transaction is also a testament to the strength of Alaris' financing model, which has proven advantageous for both investors and companies seeking growth.

Moving forward, Alaris is well-positioned to deploy the proceeds from the FR redemption into new and existing partnerships, thus fostering further growth within the alternative financing landscape. The anticipated capital deployment, complemented by a modest debt-to-EBITDA ratio, reinforces Alaris's potential for even greater financial returns in the future.

Overall, this investment reinforces the expert consensus that Alaris has made a sound strategic decision in prioritizing alternate financing solutions, positioning itself advantageously within a recovering economy.

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