Fuel Distribution Company

A highly established, fuel distribution company approached Attract Capital to refinance their current lender. The Company had a high level of assets and EBITDA.  They had grown rapidly and invested in a new line of business causing the need for more working capital.  This strained their existing bank lender relationship.  Their bank had cut them off and they were using high-cost loans to fund operations.  The owner started looking for refinancing options on his own and began discussions with mezzanine lenders. 

In the first part of the engagement, we analyzed the Company’s situation and created a new financing path for them focused on regional banks.  We created a debt structure that used both the asset value and cash flow of the business to support the funding.   In addition to the bank loan, the Company had other high-cost loans that we advised consolidating into one integrated financing solution. Our debt structure provided a balanced approach of low-cost capital and long-term repayment.  It contained additional working capital availability and was significantly less expensive than the Company’s mezzanine debt option (15% equity ownership). 

In the second part of the engagement, we ran a full lender outreach process and contacted forty regional C&I bank lenders. We prepared a new presentation to highlight the financial performance and collateral position.  We managed the process, negotiated the terms and selected the best lenders for our client to engage with.   We provided high levels of diligence and transaction support to close the financing.

Through our advice and creative financing structure, the client closed a $15.8 million term loan and line of credit facility that refinanced all loans and provided $1.5 million of availability for future working capital needs.

The new loan facility reduced the client’s current monthly debt service $175,000 per month or $2.1 million per year, which represents 65% of its free cash flow.

The interest rate on the new loan facility is 6.75% and amounts to annual interest of $965k. The proposed interest rate on the mezzanine loan was 12% with a 15% warrant.  This amounts to annual interest of $1.72 million and an issuance of a warrant worth $1.5 million to the mezzanine lender for combined $3.22 million. The new facility saves the Company 43% or $756k of annual interest.  It also saves the Company from having to give up a $1.5 million warranty resulting in total cost reduction of 70% over the mezzanine loan option.

In the third part of the engagement, we are advising the company on new acquisition financing facilities for their planned M&A roll-up.