Working Capital

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

The Company:
Privately owned manufacturer of premium artisanal Greek yogurt, handmade from a proprietary family recipe.

Financial Profile: Revenue: $21MM | EBITDA: $2MM

The Financing Situation:

The Company had engaged a middle market investment bank to secure a large round of growth equity capital. During this process, the Company required additional working capital to help complete the opening of a new manufacturing facility that would increase production capacity and in turn boost revenue, leading to a much higher valuation.

The Solution:
Super G provided a 2nd lien, non-dilutive $2.1MM term loan behind the Company’s existing bank credit facility, which consisted of an accounts receivable-based line of credit and an equipment loan. Super G quickly closed its loan which enabled the Company to complete the transition to its new facility and created more time for the Company’s investment bank to run a complete process and secure the best deal possible. Super G worked in partnership with the Company’s bank to structure the transaction on terms acceptable to all parties.

The Company:
Family-office backed U.S. manufacturer and supplier of specialty textiles.

The Financing Situation:
The Company was in the process of refinancing its existing senior credit facility with a lower cost ABL facility. However, there was insufficient collateral availability to pay off the entire senior credit facility balance. The Company’s M&E was already levered so the shortfall could only be solved with additional equity and/or a cash flow based term loan, often referred to as a “Stretch Piece.”

“Stretch Piece” defined – the portion of a loan that exceeds the amount supported by the underlying collateral and is dependent on support from the company’s cash flow or enterprise value. The Stretch Piece solves “financing gaps” also known as “airballs.”

The Solution:
Super G specializes in providing stretch pieces in a second lien position behind ABLs and worked closely with the Company’s new senior lender, Lighthouse Financial Corp. (“Lighthouse”), to quickly close a comprehensive debt refinancing. Super G’s second lien stretch piece allowed the Company to close its lower cost, flexible ABL facility with Lighthouse, thus avoiding an additional equity contribution. As a result of this structure, the Company lowered its overall cost of capital significantly.

For more information on Lighthouse Financial Corp., please contact:
J. Brad Leach
President & CEO
bleach@lighthousefinancial.net
336-272-9766
www.lighthousefinancial.net

The Company:
Leading producer of perennials, annuals and tropical plants and one of the largest greenhouse operations in the United States.

The Financing Situation:
The Company needed additional working capital for its low season (fall – winter), when sales volumes are at their lowest and preparations for the spring high-volume period begin. The Company has an asset based lending facility in place for working capital, but AR & inventory levels often do not provide sufficient availability to cover production costs during the low season.

The Solution:
Super G was able to quickly get comfortable with the Company’s seasonality, inventory mix, and production risks which were mitigated by an experienced management team, strong historical financial performance, and collateral coverage. Super G worked in partnership with the Company’s senior lender, GemCap, to provide a second lien term loan with a payment schedule tailored to the Company’s seasonal cash flow – interest-only payments during the low season and amortizing payments during the busy season.

For more information on GemCap, please contact:
Richard Ellis
Co-President
rellis@gemcapsolutions.com
310-593-9073
www.gemcapsolutions.com

The Company:
Sponsor-backed provider of employee healthcare management services.
TTM Revenue: $35mm |  TTM EBITDA: $5.6mm

The Financing Situation:
The Company was seeking additional working capital for (i) seasonality around Q4 employee enrollment, (ii) cushion to continue growth and run an M&A process, and (iii) minimum liquidity to stay in compliance with bank covenants.  The Company’s senior lender is providing an asset-based revolving line of credit as well as a large enterprise value based term loan and could not extend additional credit.  Since the Company would like to pursue a liquidity event within 18 months, a non-dilutive solution was important to management as the business continues to grow and increase its enterprise value.

 The Solution:
Super G was able to work closely with the Company’s senior lender to provide a $2.0 million non-dilutive second lien term loan with a payment schedule tailored to the Company’s seasonal cash flow, growth initiatives, and bank covenants.  Super G was able to get comfortable with the seasonality of the business and total leverage given the Company’s strong financial performance, enterprise value, and experienced management team & private equity sponsor.

The Company:
Private equity backed, outsourced pharmaceutical service provider conducting clinical research.
TTM Revenue: $17mm |TTM EBITDA: $1mm

The Financing Situation:
The Company had a cash flow based term loan with its bank and was in technical default.  Given the combination of lender fatigue, lumpy sales & cash collections due to the timing of contracts, and high monthly payments on the term loan, the Company was seeking immediate relief.  An asset based lender was not a solution due to timing and the term loan take-out amount would not conform to a borrowing base.

The Solution:
Super G provided a $2.0 million senior secured, interest-only bridge loan for a full take-out of the bank and working capital to support the Company’s immediate financing needs – a flexible structure which will allow the Company to operate its business with sufficient liquidity and buy time to run a full process for a new bank relationship.  Super G was able to get comfortable with the sales lumpiness & YTD financial performance given the Company’s strong track record, accounts receivable collateral, enterprise value, and experienced management team.  Super G was able to close quickly (within 2 weeks) which benefited both the bank (removed loan from special assets) and the Company (covenant light loan, working capital cushion, and debt service flexibility).

The Company:
Wine producer and distributor operating in a state of the art, custom winemaking facility.

The Financing Situation:
In the early stages of a capital raise, 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, Ares Commercial Finance (“Ares”), which is not affiliated with Super G, was providing a flexible asset based credit facility with favorable advance rates on accounts receivable & inventory and preferred the Company to fund any additional capital needs with junior capital.

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 Ares determined the most efficient process to close the loan was a junior participation agreement in which Super G participated in Ares’ credit facility as a “last-out” participant. This allowed the Company to obtain an additional $2 million of capital in less than three weeks via Ares’ senior working capital facility.

For more information on Ares Commercial Finance, please contact:

Matt Grimes, Managing Director
mgrimes@aresmgmt.com
(424) 285-2628
800 Corporate Pointe, Suite 300
Culver City, CA 90230
www.aresmgmt.com