Mid-Market Closely Held Manufacturing Company Accelerates Growth & Profitability Levels with a New $9,200,000 Credit Facility
Case Study

Mid-Market Closely Held Manufacturing Company Accelerates Growth & Profitability Levels with a New $9,200,000 Credit Facility

By June 13, 2023 November 1st, 2023 No Comments

OVERVIEW

  • Credit Facility: $9,200,000
    • $7,000,000 (RLOC)
    • $2,200,000 (CRE term note)
  • General Description: Manufacturing
  • Geographic Location: Ohio
  • Markets Served: Automotive, Aerospace, Agricultural, Petrochemical, Defense

THE SITUATION

Since 1977 this Ohio-based company has served some of the largest names in the automotive, aerospace, agricultural, petrochemical, and defense industries. Supplying critical cast products made from heat and corrosion-resistant alloys, the company has developed a reputation for its ability to provide solutions to its customers’ most challenging applications.

Despite the company’s market-leading position, it was confronted with several unanticipated course-altering events: 1) the unexpected passing of its founder, 2) navigating Covid-19 and the associated supply chain disruptions, and 3) dealing with the closure of the LME nickel markets and the extreme price volatility that ensued.

These significant and successive events had a negative impact on the company’s operations, financial performance, and cash flow. As a result, the company’s current lender was unwilling to renew its credit facility.

THE SOLUTION

JACO Advisory Group (JACO) along with our strategic partner DWH, completed a comprehensive review of the company and presented several near-term recommendations to its Board of Directors.

  1. Implement a 13-week cash flow forecast model and use it as a management tool.
  2. Focus sales & estimating team on margin improvement, while growing top-line revenue.
  3. Formalize a continuous improvement process, focusing on improved operational efficiency.

The Board and executive team embraced the recommendations made by JACO/DWH. The company and JACO/DWH implemented these recommendations and developed a comprehensive refinancing and turnaround plan. As part of the refinancing plan, JACO/DWH worked with the company to create proforma financials including multi-year income statements and balance sheets. JACO/DWH shared the company’s story to select sources of credit who would make solid partners for the company going forward.

THE OUTCOME

The company successfully refinanced with a new lender that understood the company’s business and the turnaround plan it was executing. The new credit facility has provided the company with the required working capital to improve its operations and return to a profitable growth trajectory.

  • The Revolving line of credit was sized to support the company’s growth plans and is collateralized by the company’s accounts receivable (including foreign receivables) and equipment, with favorable eligibility and advance rates.
  • The CRE term debt was refinanced with favorable terms, including a 25-year amortization period.

In the 6 months since the closing of its new credit facility, the company is on track to increase its gross sales by 28% YoY and improve its EBITDA by 209% YoY, exceeding the projections contemplated in the refinancing and turnaround plan.