Industry: Agricultural Commodity
Subject: Middle market Texas based, top tier exporter of pork and other proteins into the NAFTA market
Circumstances: Summit engaged directly with a national lender that expressed a desire to exit its lending relationship, comprised of a series of loans totaling $39 Million, with the company. A subsidiary of the company had entered into a number of trade finance transactions in prior years that had led to significant cumulative losses, creating an over-leveraged balance sheet. The balance sheet issues were causing challenges with vendors, and the company was carrying aged accounts payable which needed to be addressed as part of the Summit transaction in the form of additional liquidity.
Solution: Prior to acquiring the bank debt, Summit and the sponsor group agreed in principal to the terms of a post-closing balance sheet restructure and additional loan advances to right size the accounts payable.
- The balance sheet restructure was completed post-closing
- The company has refined its business model by focusing on higher margin sales
- The additional loan advances allowed the company to pay down aged accounts payable
- The company has dramatically reduced its foreign currency risk exposure
- The company adjusted its business model and currently takes no principal risk on the product it sells by acting solely as an intermediary taking a margin between the seller and buyer for its logistical and sourcing services
- Summit is working with the company to refinance the ABL facility with more traditional capital at lower interest rates
- Summit continues to work collaboratively with the Company and has maintained a strong working relationship with the sponsors