HPS Specialty Loan Fund VI
Project Mahalo
Scaled financing solution for non-sponsored borrower with unique complexities
Background
Project Mahalo is an operator of various
transportation and logistics businesses
operating in Hawaii and on the US West Coast.
In July 2021, HPS led a $200 million First Lien
Term Loan facility with proceeds used to
refinance indebtedness, redeem preferred stock
and fund cash to the balance sheet
Investment Details at Close
Security
HPS Loan-to-Value
Interest Rate
LIBOR Floor
OID / Upfront Fee
Call Protection
Maturity
Covenant
Status
1st Lien Term Loan
36%¹
L+775 bps
1.00%
97.25
NC 2 | 104 | 102 | 101
5 Years
Maintenance-based
comprehensive covenant
package
Current
Transaction Dynamic and HPS Value-Add
■ Family founder-owned business sought private financing partner able to
navigate business and structural complexities. The borrower valued:
-
HPS
-
Ability to document and structure appropriate secured risk given a mixed asset base of
unencumbered vs. encumbered collateral
Deep vertical experience with Jones Act regulatory considerations
Speed and certainty of execution
■ Significant proprietary diligence conducted, including HPS-mandated Quality of
Earnings analysis provided by financial services consultant of our selection;
monthly financial reporting; and quarterly budget update discussions
The borrower continues to execute, including substantial new business wins that
generate contracted fee income from an investment-grade counterparty
Since the initial close, the borrower has engaged with HPS on additional opportunistic
financing to address its cost of capital through the preferred equity layer, and values
HPS's position as a constructive lending partner of scale.
Investment Thesis
■ Incumbent position in stable duopoly with high entry barriers - longstanding and
stable market position serving a critical US ocean supply route served by only two
players
Dynamics within the Hawaii trade lane protected by significant barriers to entry -
the provisions of the Jones Act insulate Hawaii-US trade from foreign competition
■ Stable, blue chip customer base with longstanding relationships - longstanding
blue chip customer base with >20-year relationships with top three customers
■ Loan structured with meaningful amortization and call protection - mandatory
amortization increasing to 5% after one year and two years of hard non-call
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Data as of December 31, 2022 unless otherwise noted. This investment represents a small portion of the overall Specialty Direct Lending
Strategy (the "SLF Strategy") and is not representative of the overall SLF Strategy. There can be no assurance that the SLF Strategy's other investments will share any of the characteristics above. While the SLF Strategy will
seek out investments that may contain similar characteristics described above, and other investments pursuant to the portfolio guidelines and restrictions, there can be no assurance that any such opportunities will be
available or that the SLF Strategy's investments will share any of these characteristics. Case studies are based on or about the date of investment. ¹ Based on assessed collateral value at close.
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