Background

The company, a leading provider of contract labour to the engineering sector, had previously used an asset-based lending (ABL) facility as its principle source of working capital finance. The company was then acquired in a secondary buyout, and the new sponsor – having bridged the acquisition with its own funds – needed to repay the debt element of their bridge, together with a larger facility limit and more commitment around its ABL facility, which was a continuing requirement.

Action

FRP Debt Advisory ran a competitive debt-raising process across both ABLs and debt funds, including the existing lender. The aim was to increase the level of working capital, and provide the required cashflow facility as well as the ABL facility, maximising returns for the private equity house.

Outcome

A number of lenders submitted terms. The successful lender provided both a larger working capital facility and a cashflow loan totaling £19 million, significantly reducing the weighted average cost of capital and repaying the sponsor bridge facility. They also provided greater commitment in the ABL facility which, together with a ‘lighter touch’ set of financial covenant terms, provided a significantly improved debt facility to both the company and the sponsor.