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Meridian Industrial REIT · MIR

DEMO DATAUNDERWRITING ASSUMPTIONHOLD
Five-minute case summary

Meridian Industrial REIT

DEMO DATAUNDERWRITING ASSUMPTION
HOLD
1
The opportunity
Demo purchase of $100M face of Senior Unsecured Notes 3.90% at 88.0 (cash investment $88.4M): current yield 4.4%, yield to maturity 6.8%.
2
The question
Does a 6.8% yield on a rank-1 unsecured claim compensate for 0% probability-weighted default risk and 0% severe-case loss?
3
The thesis
Low-coupon 2031 notes trade at 88 against a 3.5x asset-coverage cushion; pull-to-par plus coupon gives a high-single-digit return with limited loss potential even if industrial values fall 35%.
4
The risk (what causes loss)
  • Unsecured, rank 1: $0M of debt ranks ahead.
  • Elevated leverage: net debt / EBITDA 4.6x.
  • Weakest credit-score factor: Leverage (7.1 of 15 points).
  • Cap-rate expansion
5
The protection
  • Severe-case valuation recovery of 100% covers the 88.0 purchase price (principal protected).
  • Coverage of 4.08x EBITDA / interest; EBITDA can fall 76% before coverage reaches 1.0x.
  • Liquidity of $510M (29% of total debt).
  • Base-case refinancing tests pass for all 2 maturing tranche(s); 2 are repaid from cash.
6
The base case
Base case (55%): revenue 4.0% in FY2026E, EBITDA margin 70.0%; no default; IRR 8.4%, MOIC 1.26x vs 12% hurdle.
7
The downside
Downside (30%): EBITDA $319M at the trough, peak net leverage 4.6x, covenants hold; no default; IRR 5.0%. Severe (15%): no default, IRR -2.7%.
8
The recovery
If the company defaults, recovery value is $3.7B (going concern) in the severe case → 100% recovery (0% LGD) on the target tranche; downside 100%.
9
The decision
HOLD. HOLD (do not size yet): Base-case IRR clears hurdle (8.4% vs ≥ 12.0%); Expected-cash-flow IRR (probability-weighted) clears hurdle (5.9% vs ≥ 12.0%); Entry yield meets minimum (6.8% vs ≥ 9.0%).

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.