The Company: Midwest-based specialty retailer of mattresses and accessories. The Company sells through 50+ stores as well as its Company-owned DTC eCommerce channel.
The Financing Situation: The CEO was looking to complete a management buy-out of the Company. The business was owned by a family office that acquired it through a restructuring a few years ago. After negotiating the purchase price, the management team needed additional capital to supplement their equity contribution to complete the acquisition and provide sufficient working capital. A traditional inventory borrowing base alone would not generate enough liquidity to fund the acquisition and support the working capital needs of the business.
The Solution: SG provided a comprehensive solution by funding two tranches of term loans. The first tranche was supported by a borrowing base (advances against inventory) and required interest-only payments until maturity. The second tranche was structured based on the cash flow of the business with required interest and principal payments based on a 36-month amortization schedule. By using a hybrid approach of leveraging the company’s assets and cash flow, SG was able to provide the needed liquidity and did not require warrants or other equity instruments, which would have diluted the buyer’s ownership.