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Cloudspire Technologies · CSPR

DEMO DATAUNDERWRITING ASSUMPTIONHOLD
Five-minute case summary

Cloudspire Technologies

DEMO DATAUNDERWRITING ASSUMPTION
HOLD
1
The opportunity
Demo purchase of $100M face of First-Lien Term Loan at 91.0 (cash investment $91.5M): current yield 11.1%, yield to maturity 15.5%.
2
The question
Does a 15.5% yield on a rank-1 secured claim compensate for 45% probability-weighted default risk and 44% severe-case loss?
3
The thesis
Strong growth and improving margins, but coverage is only ~1.5x and the loan is a single-tranche capital structure with recovery that depends on software going-concern value. Needs diligence on ARR quality and sponsor support before sizing.
4
The risk (what causes loss)
  • Thin interest coverage: EBITDA / interest 1.46x at FY2025A (EBITDA could fall 32% before coverage hits 1.0x).
  • Refinancing: $650M maturity in FY2028E; only $175M projected liquidity; $475M refinancing requirement.
  • Downside-case recovery of 90% falls short of the purchase price.
  • High leverage: net debt / EBITDA 6.2x (maximum in policy 6.0x).
5
The protection
  • First-priority secured position on substantially all assets; 0% of recovery value is senior to us and 97% through our tranche.
  • Base-case refinancing tests pass for all 2 maturing tranche(s); 1 are repaid from cash.
  • No covenant breach in the Downside case.
  • Margin expansion compounding with growth
6
The base case
Base case (55%): revenue 14.0% in FY2026E, EBITDA margin 20.0%; no default; IRR 13.5%, MOIC 1.42x vs 12% hurdle.
7
The downside
Downside (30%): EBITDA $78M at the trough, peak net leverage 7.9x, covenants hold; default in FY2028E; IRR 9.9%. Severe (15%): default in FY2027E, IRR -3.6%.
8
The recovery
If the company defaults, recovery value is $381M (going concern) in the severe case → 56% recovery (44% LGD) on the target tranche; downside 90%.
9
The decision
HOLD. HOLD (do not size yet): Expected-cash-flow IRR (probability-weighted) clears hurdle (10.3% vs ≥ 12.0%); Net leverage within maximum (6.2x vs ≤ 6.0x); Principal protected in severe case (recovery ≥ price) (56 vs 91.0 vs recovery ≥ price).

Generated from the structured model (no free-text generation beyond the analyst’s thesis and risk lists). Hypothetical terms are underwriting assumptions; nothing here is a real transaction.