Representative Transactions

Featured Transactions

Problem:

Weather Trends International “WTI” was in a precarious situation with the bank after being notified of a covenant violation.  The bank’s charter requires that there be at least one equity sponsor in the corresponding portfolio clients company.  WTI’s main equity sponsor had converted all it’s equity to debt for $1.  The investor subsequently forgave this debt and allowed WTI to continue the normal course of business.  CCG was engaged to find a new lender under a difficult structure with a short window.

Solution:

While conducting our due dilligence, it was discovered that over 50% of WTI’s receivables were progress billed.    Revenues were very stable from Fortune 500 clients with a 96% customer retention since inception.  Unfortunately, WTI’s venture capital investors’ limited partnership dissolved leaving them without an equity sponsor. The bank that provided the previous ABL credit facility requires that that clients within their portfolio remain backed by a respected equity sponsor.  As a result, the bank asked them to seek alternative financing.  Culver Capital contacted a number of Asset Based lenders and secured 2 term sheets within 2 weeks.  We selected a lender that fit within the borrowing requirements of WTI and the lender didn’t necessarily discount the progress billings.  All of WTI’s receivables were from Fortune 500 companies which made the lender even more comfortable.  The structure was based on 80% of eligible AR, with over advances available to future billings.  Since the company was not profitable but trending according to plan, 5% warrant coverage as PIK was also incorporated into the loan.  Timing was critical as WTI only had 3 weeks to find a new lender and have commitments on the new credit facility.  We paid off the old bank and had a smooth transition forward with new lender.

Summary:

Out of the box financing requirements are not easy to come by in this economic lending arena.  Culver was able to execute and deliver in the time required for WTI’s needs.

Problem:

Lozamax was beginning operations as an importer of Mexican Haas avocados beginning in 2010.  They had invested heavily into Mexican infrastructure, to include a packing plant in Michoacán. As a start-up entity with no operational history, the challenges were obvious.  One of the primary hurdles Culver Capital had to overcome was the PACA Trust law instituted by the USDA.

Solution:

PACA Trust “Perishable Agricultural Commodities Act of 1929” was established to ensure all payables of business transactions related to PACA Trust have fall back accountability to ensure every link in the chain of distribution is held accountable for the sale of that product.  Culver’s deep experience in the space allowed for us to bring in a new lender not familiar with PACA to fund the transaction. We were able to establish creditability of the principal owners experience within the industry and guide the lender on dealing with PACA transactions.  As a result, we were able to provide a $750,000 accounts receivable credit facility within weeks of undertaking the transaction.  The result was improved cash flow for the company as well as staying on top of the PACA payables.  Credit monitoring was also provided for all the account debtors to ensure USDA compliance. The end result was a growing company without any previous corporate credit to thrive where others would have been forced into insolvency.

Summary:

Start up entities in the Perishable Agricultural Commodity space to have options for financing even if they are start-up.  The new lender was able to fund their first collateral batch within 3 weeks of the initial contact.

Problem:

Pinnacle Transportation was founded in 200 as a hauler of modular offices and homes.  As a specialty hauler, their services cater to a select group of clients.  Revenues were at their highest in the aftermath of Hurricane Katrina, to the tune of $80MM.  With the decline in the US economy and the lack of spending in the industries they served, revenues began to fall in Q1 2008.  Revenues dropped to a low of $5MM in 2009 and drastic measures were instituted to curb costs.  As a result of the company was not able to renew its credit facility with its bank.  The DCSR violation was their primarily reason for being asked to seek alternative funding. During the investigation of a new lending relationship, they stumbled upon an opportunity that would increase revenues 500% over the next 12 months.

Solution:

Through the company’s implementation of cost cutting measures, they were able to stabilize costs without a need for additional equity.  The company had enough collateral in the form of AR and hard assets for a new working capital facility and provided the funds necessary to acquire the new business opportunities.  They have doubled revenues in 2010 and are on track for 3X from 2009.  We were able to secure a formulaic asset based line of credit with a national lender with prime based pricing and no minimum volume requirement.  There is a quarterly financial reporting covenant with weekly BBC’s.  In the end, the bank was delighted to keep their depository relationship while also being able to assist the client in achieving internal growth by referring them to Culver Capital.

Summary:

The right sources of capital enabled Pinnacle to achieve tremendous growth in a down market.

Problem:

MM USA was expericening a high level of growth with continued losses. They had grown year over year with revenues in excess of $75MM in 3 years of operation.  While the company was experiencing this growth, their European parent was funding ongoing losses.  With hedging against foreign currencies, they lost on some of these calls.  Their parent asked them to find a US based lender willing to financing US/Canadian receivables as well as high inventory levels.

Solution:

Through many meetings with the client and financial analysis, Culver brought 4 lenders into the fold and received 3 Term sheets based on our assessment of the opportunity.  PACA Trust “Perishable Agricultural Commodities Act of 1929” was established to ensure all payables of business transactions related to PACA Trust have fall back accountability to ensure every link in the chain of distribution is held accountable for the sale of that product.  Culver’s deep experience in the space allowed for us to bring in a new lender not familiar with PACA to fund the transaction. We were able to establish creditability of the principal owners experience within the industry and guide the lender on dealing with PACA transactions. The structure included a $7.5MM of initial funding of 85% of eligible AR, and 30% inventory advances.  Pricing was Prime +2 with a floor of 5.75% and 1 point.  A standby letter of credit was also put in place for the foreign receivable component.

Summary:

International holding companies looking to have autonomous financings for their affiliate companies should look to Culver Capital as the go to advisor.  This transaction was highly structured and took many of our professionals to get this deal done.

Problem:

The Company’s CEO and founder had virtually all of his net worth tied up in his Company. He was wealthy but illiquid.  He desired to diversify his assets and provide some liquidity for his personal estate.  He contacted Culver Capital to discuss the various options available to him.

Solution:

After discussing a number of options including selling the Company, it was decided that raising a round of subordinated debt secured by the cash flow of his Company would provide the best solution. A sale of his Company would have also provided the liquidity he desired but the Company was in a high growth mode and selling the company now would mean leaving a lot of chips on the table.  Culver Capital contacted a number of subordinated debt lenders and secured 5 term sheets within 2 weeks.  After narrowing down the list, the company met with the top three lenders and decided to move forward with one investor based on a combination of pricing, structure, investor flexibility and personal chemistry.  The investment was structured as a 5 year note with a 12% current interest rate, 2% PIK interest and warrants.  This structure allowed the owner to receive a one time dividend from the Company of $6,500,000 and maintain a 90% ownership stake in the Company.  In two or three years he can still pursue a sale of the Company and if the Company performs according to plan, the sale price could be as high as twice the valuation he would receive today.

Summary:

Business owners that desire liquidity have options available to them other than an outright sale of the Company.  Subordinated debt can be a good vehicle to raise growth capital, cash out a shareholder, pay off seller notes or provide liquidity for the owner.  If your revenues are $10M or above and you have at least $1.5M in free cash flow, maybe we should have a conversation about your options.