Invoice Discounting Case Study - Engineering - Structured Finance

Deal type: Structured Finance Industry Sector: Engineering Turnover: £10m

This engineering business was formerly part of a much larger publicly listed company. A management buyout had been arranged two years earlier with the assistance of £1.75m of loan stock provided by Venture Capitalist (@ 14% pa) plus a further £1m via a sale and leaseback facility secured on unencumbered plant and machinery.

The company had a very good first years trading but then its major customer (60% of turnover) decided to move to "World Sourcing" and cut its orders significantly. Needless to say the company's bank was nervous and unwilling to help. They were recommended to us by another of our clients and we were able to re-structure their borrowings to include an Invoice Discounting facility at a fixed charge of only £7,600 pa and we re-mortgaged their property to also release additional working capital.

This re-structuring gave the company the time to find new customers to replace the missing sales and it also decided to move into new markets to further spread the risk of ever being in the same position again. Now no one customer represents more than 15% of turnover.

In the last 3 years the company has gone from strength to strength, has repaid all of its expensive loan stock and we have provided further finance for them to move to a new and larger factory, plus asset finance for new machinery and funding to help with establishing a new manufacturing facility in Eastern Europe.

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