Second Lien

The Company: Privately held independent registered investment advisor (RIA) that provides wealth, asset, and business management services to high-net-worth individuals and families. The Company has a variety of unique services not typical of traditional RIAs including access to alternative investments.
Assets Under Management: $300MM+
 
The Financing Situation: The Company was experiencing rapid growth in AUM and planned to go to market to find a strategic partner that could provide the financial and operational support needed to continue to scale the business. Ahead of that transaction, Company management wanted to secure a non-dilutive loan to help finance operational burn and extend runway. The capital would allow the Company to continue to add AUM and give it time to improve enterprise value ahead of a transaction.
 
The Solution: SG was able to get comfortable with the transaction due to the Company’s sticky recurring revenue business model, projected growth in run-rate revenue supported by a strong pipeline, the enterprise value of the Company, and its clear path to profitability. SG was able to close the transaction within 10 days of a signed term sheet.

The Company: Founder-owned managed service provider offering leading SD-WAN and edge solutions to businesses around the world.

The Financing Situation: The Company demonstrated significant year-over-year growth and had recently signed several large, multi-year contracts with new customers. The Company needed upfront working capital to invest in additional people costs in order to effectively perform on upcoming contracts. Additionally, due to the timing of annual payments, monthly cashflow could be lumpy. The Company needed a flexible, quick-to-close solution and the owners preferred to finance the Company’s capital need with non-dilutive debt rather than equity.

The Solution: SG Credit was impressed with the Company’s large recurring revenue base, strong pipeline of signed contracts and substantial enterprise value. SG Credit provided a second lien $1.5MM loan behind the Company’s existing factoring relationship, which provided the Company with enough working capital to smooth out monthly cashflow and successfully perform on the recently signed contracts.

The Company: Provider of IT managed services and cloud collaboration solutions.  The Company’s management team owns corporate real estate held in a LLC outside of the Company.

The Financing Situation: The Company was in need of upfront working capital for new contracts, but did not have availability on its bank ABL.  The bank ABL had recently closed its credit facility and was not able to provide additional financing until there was a six month track record of positive financial performance.  Management was intent on executing the new contracts and was willing to provide a second deed of trust on its corporate real estate outside of the business as security for a loan.

The Solution: SGCP quickly underwrote the Company and was able to get comfortable with projection based debt service since there was sufficient equity in the corporate real estate as security.  SGCP provided a $2 million second lien cash flow loan to the Company secured by a second deed of trust on the corporate real estate which enabled the Company to execute on its new contracts and grow the business.

The Company: Industrial recycling company that sells processed and unprocessed materials to domestic and international mills, foundries, and other material processors. Ownership: Family-owned. Financial Profile: $40 million of revenue.

The Financing Situation: Management was exploring a sale of the Company and needed additional working capital beyond the availability on their asset-based credit facility. SG was approached by the Company’s bank ABL to provide a second lien working capital loan to enable the Company to run a sale process without any potential for liquidity shortfalls.

The Solution: SG Credit Partners was able to quickly get comfortable with the Company’s financial profile and provided a $1.5 million loan with interest-only payments to give the Company maximum liquidity throughout the sale process. The loan funded within three weeks of a signed term sheet, alleviating liquidity constraints and allowing management to focus on selling the Company.

SG Credit Partners’ second lien loans can help senior lenders close deals (onboard new clients), offer a liquidity solution when unable to lend up (retain existing clients), and/or solve out-of-formula / technical default issues.

The Company: Founder owned staffing company that provides a full suite of employment solutions to IT, life sciences, and business services clients.

Financial Profile: Revenue: $85.0MM | EBITDA: $4.0MM

The Financing Situation: The Company had realized strong revenue growth over the last few years and had a strong pipeline for continued growth. The Company’s bank, Wells Fargo Capital Finance (“Wells Fargo”), was in the process of increasing its revolving LOC facility to scale with business growth and wanted subordinated capital to provide liquidity cushion. Additionally, the principals of the Company were sensitive to dilution and wanted a solution without a warrant / equity requirement.

The Solution: SG Credit Partners was able to get comfortable with the business due to its strong client base consisting of large fortune 1000 clients, historical profitability, strong growth trend, and a robust pipeline of new business. SG Credit Partners provided a non-dilutive $2.0MM loan behind Wells Fargo with structured amortization to provide flexibility around the Company’s projected cash flow. The transaction closed within three weeks and Wells Fargo successfully increased their AR facility.

SG Credit Partners’ second lien (subordinated) loans can help senior lenders close deals (onboard new clients), offer a liquidity solution when unable to lend up (retain existing clients), and/or solve out-of-formula / technical default issues.

For more information on Wells Fargo Capital Finance, please contact:
Tom Engelberger
Vice President
Thomas.Engelberger@wellsfargo.com
(754) 301-5163
https://wellsfargocapitalfinance.com/

The Company:
Privately owned wholesaler of licensed toys, collectibles, and housewares.
Revenue: $22mm | EBITDA: $2.8mm

The Financing Situation:
The Company needed additional working capital to purchase inventory in advance of the holiday busy season. The Company has a flexible asset-based credit facility from FSW Funding (“FSW”), however, given the seasonality of revenue, the Company’s current accounts receivable balance did not provide sufficient availability to purchase the inventory needed for its busy season.

The Solution:
Super G was able to quickly get comfortable due to historical financial performance, strong management team, and funding into the Company’s busy season. Super G provided a non-dilutive $1.0mm second lien loan behind FSW with repayment structured around seasonal cash flow, which enabled the Company to purchase inventory to meet seasonal demand. The transaction closed in less than two weeks.

For more information on FSW Funding, please contact:
Adam Keck
Senior Vice President
akeck@fswfunding.com
480-440-2496
www.fswfunding.com

The Company:
Family office backed designer, marketer and manufacturer of specialty dancewear.
Revenue: $18mm | EBITDA: $2.4mm

The Financing Situation:
The Company had recently established an inventory based credit facility with Crossroads Financial to fund general working capital needs and was in need of additional liquidity during its low season (April to October) for inventory purchases and general operating expenses. Given the recent inception of the relationship and low inventory asset base due to seasonality, Crossroads Financial was not comfortable providing an out of season over-advance stretch piece.

The Solution:
Super G was able to get comfortable with the business due to historical performance, strong recurring customer base and consistent seasonal trends. Super G provided a non-dilutive second lien loan with repayment structured around seasonal cash flow, which successfully bridged the Company through its low season to busy season collections (November – February). The transaction closed in less than two weeks.

For more information on Crossroads Financial, please contact:
Lee Haskin
CEO
lhaskin@crossroadsfinancial.com
561-997-8626

Jarrett Levy
Business Development Officer
JLevy@crossroadsfinancial.com
561-997-8627

The Company:

Privately owned portfolio of commercial and residential real estate. Total portfolio value: $300 million.

The Financing Situation:

Successful retail entrepreneur diversified his wealth into real estate. While the Company was in the process of selling several large commercial real estate properties in California for liquidity, there was a working capital need to cover operating costs until the transactions closed.

The Solution:

Super G was able to quickly get comfortable with the transaction due to the appraised portfolio value, market feedback, and equity in specific real estate properties. While there was no specific property with equity to support a $3.3 million loan, Super G was able to get comfortable with a pool of properties in a second lien position which traditional real estate and hard money lenders were not comfortable with. Super G provided a $3.3mm second lien term loan with interest-only payments and closed in one week.

This transaction highlights Super G’s expertise in special situations. While the majority of our deals are and will be cash flow based, we will opportunistically provide special situation (balance sheet) loans requiring creativity, flexibility, and speed to close. We also have a strong interest in providing customized solutions for illiquid high net worth entrepreneurs.

The Company:

Provider of a SaaS based system that assists K-12 educators and administrators in managing, overseeing and enhancing their students’ engagement in digital learning environments.

The Financing Situation:

Due to the cyclical nature of education-based budgeting and spending in school districts, cash flow in the EdTech space is highly seasonal. Contracts are paid on an annual basis with the vast majority coming in during one quarter of the year. This leads to temporary cash shortfalls which were historically financed primarily through equity from investors. Knowing the company was very close to attaining “escape velocity” and not wanting to further dilute equity, they sought out venture debt as an alternative financing option.

The Solution:

Led by a strong management team, demonstrating solid revenue growth since inception, and having already completed a cost restructuring during 2017, Super G recognized the company was poised for profitability and overall success with the help of some working capital cushion in the near term. Super G was able to work quickly to complete diligence and documentation in order to fund a $1.25MM loan within three weeks and solve the company’s seasonal cash shortfall.

The Company:

Producer of machined and fabricated components and parts for original equipment manufacturers in the agriculture, construction, mining, and oil & gas industries.

The Financing Situation:

The Company was seeking additional working capital to create availability on its line of credit and fund growth initiatives. The Company’s asset based lender, North Mill Capital (“North Mill”), which is not affiliated with Super G, was providing a flexible, asset based credit facility with favorable advance rates on accounts receivable & inventory.  Given the cyclical nature of the industry, the Company was seeking additional cushion on its credit facility.

The Solution:

Under similar situations, our typical deal structure is to provide a second lien loan and enter into an intercreditor agreement with the senior lender(s). However, since there were multiple senior secured equipment lenders in this situation, negotiating and entering into intercreditor agreements with all would be cumbersome and delay the closing timeline. Super G and North Mill determined the most efficient process to close the loan was a junior participation agreement in which Super G participated in North Mill’s credit facility as a “last-out” participant. This allowed the Company to obtain an additional $2.0 million of capital in less than three weeks via North Mill’s asset based facility.

For more information on North Mill, please contact:

Heidi Ames
Senior Vice President
hames@northmillcapital.com
609-917-6207
https://www.northmillcapital.com