Virtas Partners was engaged by a family-owned specialty metals manufacturer for refinancing, mentoring and to assist with developing a realistic performance improvement plan. Virtas facilitated new credit facilities with lower borrowing costs and two over-advances, resulting in no dilution of equity.
Client Background
The company had missed projections and was experiencing operating losses, leading to severe lender fatigue. The investment banker that had been hired prior to Virtas involvement had incorrectly executed the arrangement and go-to-market strategy, and had received no proposals. A lack of liquidity further drove losses due to quick shipments of customer orders requiring overtime.
Scope of Services
- Coaching and mentoring
- Financial business / cash modeling
- Developed CIM and ran a process with potential lenders and generated multiple proposals
- Negotiated terms and structured the deal in alignment with realistic financial projections
- Negotiated a favorable discount with incumbent lender
- Facilitated strategic vision / roadmap
Significant Milestones
- Complex re-financing, multi-phased approach:
- Phase I: Moved working capital line to factor and received a term loan on inventory to provide incumbent lender with a much needed paydown of the exposure
- Phase II: Moved term loan of equipment and real estate to an SBA lender to extend amortization to reduce monthly cash outflow. Company received an over-advance exceeding 20% of the facility with a 10-year amortization.
- Phase III: Moved the working capital line to a traditional ABL. The company received an additional over-advance exceeding 7% of the facility with a three-year amortization.
- Inter-creditor agreement – Negotiated terms with four separate entities: two lenders and two governmental agencies.
Value to Client
- Negotiated exceptional lender terms including two over-advances that recapitalized the company without diluting equity
- Significantly reduced borrowing costs to allow the company to maintain minimum debt service ratios
- Established effective communications with suppliers / customers / lenders
- Splitting up the collateral in phases allowed for multiple over advances without diluting equity