The 18-month refi.

Month eighteen is when the senior should be refinanced.

By month eighteen, the platform has eighteen months of operating data, the first add-on should be integrated, and the original senior was priced for the entry, not the platform. The refinancing typically opens up half a turn of additional leverage and removes one or two covenants that are now obsolete.

The bake-off takes thirty days. The new lender wants to see twelve months of reported EBITDA trending in the right direction. The proceeds free up the optionality for the next add-on or the dividend recap.

The call list for the refinancing is short. Build the relationships in months six through twelve, when the platform is not asking for anything. The lender who shows up at month eighteen is the lender you have already met.

The original senior facility was priced and structured for a platform that did not yet exist. The lender priced based on projected EBITDA, projected covenant compliance, projected integration success. The lender required tight covenants to protect against execution risk.

By month eighteen, the projections have either come true or they have not. If they have come true, the platform is over-collateralized. The original lender's risk has gone down, the original lender's leverage on the platform has gone up, and the original lender is making more money on the relationship than the market would price at this point.

The new lender, looking at month-eighteen data, can price the facility differently. The same $25M senior at SOFR plus 575 (entry pricing) could be replaced by $30M senior at SOFR plus 425 (month-eighteen pricing, with looser covenants).

Lower spread: $30M at 425 bps saves roughly $375K per year vs $25M at 575 bps. Across a 3-year hold from month eighteen to month fifty-four, that is $1.1M of interest savings.

Higher amount: $30M minus $25M is $5M of fresh capital. That fresh capital can fund an add-on, a dividend recap, or growth capex.

Looser covenants: the original facility had a 3.5x total leverage cap, a 1.2x fixed charge coverage ratio, and quarterly audited financials. The new facility might have 4.0x total leverage, 1.1x fixed charge coverage, and quarterly compliance with annual audits.

The trade is the refinancing fees. Total transaction cost is typically $500K to $750K.

The capital partners who matter here are a small set of senior lenders who specialize in lower-mid-market sponsor-backed platforms. The list is short. The call list for the refinancing is built months in advance.

The relationship-building happens when the platform is not asking for anything. The lender who calls the independent sponsor in month nine to ask about the platform's performance is positioning to win the refinancing in month eighteen.

Capital after close runs through relationships that are built before they are needed.