Target Information

Alaris Equity Partners Income Trust (the "Trust"), based in Calgary, Alberta, specializes in providing alternative financing solutions to private companies, termed as "Partners." These financing arrangements typically include preferred equity investments and common equity stakes, allowing Alaris to generate stable cash flows through distributions. The Trust’s investment strategy has proven successful, achieving record revenue and normalized EBITDA during the second quarter of 2021.

For the quarter ending June 30, 2021, Alaris reported revenue of CAD 34.9 million, marking the highest quarterly revenue in its history. This represented a 37% year-over-year increase on a per unit basis. Additionally, the Trust generated normalized EBITDA of CAD 31.2 million for the same period, a 50% increase from the previous year, largely due to improved contributions from its Partners and reduced administrative expenses.

Industry Overview in Canada

Canada's alternative financing industry has been evolving, particularly as traditional lending continues to tighten in response to economic fluctuations. Private companies are increasingly seeking innovative financing options to sustain operations and grow amid constrained credit markets. This trend has fostered an environment where alternative investment firms, like Alaris, can thrive by bridging the capital gap for these companies.

Moreover, the ongoing recovery from the COVID-19 pandemic has rejuvenated interest in sectors such as technology, healthcare, and infrastructure, with many companies requiring equity financing to scale up. The Canadian government’s supportive regulatory framework, alongside low-interest rates, has further incentivized investment in private businesses, making the alternative financing sector a vital player in the national economy.

The demand for flexible financing solutions is underscored by the performance of Alaris, which has successfully invested over CAD 400 million in various private companies over the past year. This impressive deployment signals strong market confidence and the potential for robust returns, reflecting the Trust's strategic positioning within the broader financial landscape.

As the economy continues to recover, the prospect for growth in the alternative financing sector remains promising. Firms providing such financial solutions are expected to benefit from the increased capital appetite among private companies, with Alaris poised to capitalize on these market dynamics given its established reputation and successful investment history.

Rationale Behind the Deal

The recent contributions from D&M Leasing and the recovery of distributions from PF Growth Partners signify Alaris's ability to attract and maintain profitable partnerships. These investments are instrumental in leveraging Alaris's capital while ensuring steady cash flow for the Trust's unitholders. The enhancement of earnings coverage ratios (ECR) further reinforces the viability of Alaris's investments, showcasing the financial health of its partners.

The decision to also increase annual distributions aligns well with the overall financial performance and strategic goals of the Trust. With a payout ratio below 65% and a healthy ECR distribution pattern, Alaris is confidently positioned to enhance shareholder value.

Information About the Investor

Alaris Equity Partners Income Trust is a publicly traded income trust that provides financing solutions to private companies in exchange for regular cash distributions. Founded in 2004 and headquartered in Calgary, Alaris has cultivated a robust portfolio of partnerships, including over 20 active investments across various industries.

The Trust is primarily managed by a seasoned team with extensive backgrounds in investment management, finance, and operations. Alaris has consistently focused on maintaining strong relationships with its Partners, ensuring mutual growth and financial stability, which is pivotal for its continued success in the alternative financing market.

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In my expert opinion, the recent performance of Alaris Equity Partners is indicative of a strong investment opportunity. The significant increase in revenue and normalized EBITDA highlights the efficacy of its investment strategies, while the health of its partners reinforces the soundness of its capital allocations. The Trust’s flexibility in payments and the robust recovery of distributions from its partners further contribute to a positive outlook for investors.

Moreover, with the ongoing demand for alternative financing rapidly expanding, Alaris is well-positioned to capitalize on these trends. Its track record of successful capital deployment and management makes it a compelling choice for investors seeking stability and growth in their portfolios. Given the current low-interest-rate environment and market shift towards flexible financing solutions, Alaris’s prospects appear promising.

In conclusion, the combination of Alaris’s strategic investments, sound management practices, and favorable industry dynamics suggests that this Trust remains a valuable asset for investors looking to achieve solid returns in the evolving landscape of private equity financing.

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