The second blog in our series of consulting case studies takes an in-depth look at common pain points for rapidly growing businesses and tackles an improvement in terms with additional availability to a client’s debt structure. Our recent work with this client involved:
- Increasing company bank lines
- Simplifying company debt capital structure
- Obtaining significantly better interest rates and terms than those previously in place
The Challenge
GHJ (GHJ) was retained to assist the client, a leading equipment leasing company, to obtain financing and take the company through an anticipated growth period. The client had grown rapidly during the past five years, both organically and by acquisition. The company had opened additional locations as well as increased the size of existing locations.
The right side of the client’s balance sheet was comprised of a variety of lines and term loans, the covenants of which were time consuming for the company’s Chief Financial Officer to process on a regular basis. Additionally, there was a personal guarantee required from the company’s owner. Most importantly, however, there was insufficient availability on the lines from the existing lender to finance the company’s anticipated growth over the next several years.
Our Recommendation
The GHJ Consulting Team recommended that the client consider a private placement of nearly $50 million of debt. Based on the team’s knowledge of the marketplace, there is currently significant private capital (e.g., non-bank loans) available for borrowing. Given the integrity of the cash flow and assets of the company and its recent and anticipated growth, GHJ believed the client would be well served by exploring this market.
After obtaining the client’s agreement to the proposed strategy, GHJ identified and reached out to investment bankers who would be effective in a private placement of the issue. The client found two of the proposals compelling and ultimately engaged one of them to implement the plan.
The Outcome
In the end, when faced with the potential loss of an excellent customer and credit, the incumbent lender submitted a proposal to refinance the existing loan lines of the company. In doing so, they also offered significantly more credit availability, presented better interest rates, improved covenants and eliminated the requirement for a personal guarantee from the owner. The transaction closed less than three weeks after the investment banker was engaged.
This success story is the direct result of the GHJ audit partner collaborating with GHJ’s Consulting Team to create an optimal outcome for the longstanding client.
In addition to providing services the assist owners planning for growth and potential exits, GHJ also offers robust corporate finance services, including advice on recapitalizing balance sheets, examining potential acquisition opportunities and identifying the ideal investment banker to meet client needs. Contact a GHJ advisor to guide your company through its growth period.
