LB has succeeded in investing more than 150 million euros in industrial and technological leasing operations. We perform servicing of more than a thousand assets.
Due to confidentiality we do not disclose the names of our clients.
Most representatives cases:
Company in the automotive sector; a family business that was forced to sell 53% of its capital to private equity funds.
In 2014 the company was fairly leveraged, with a net debt/EBITDA ratio above 5x, and a DSCR below 1x due to an aggressive international expansion plan that required significant financial resources.
The problem was derived from their capital-intensive activity (€11 million in industrial assets), with the high leverage and undercapitalisation hampering their access to credit.
The company needed funding to implement a highly efficient production process developed in-house, access to funding was constrained.
LB managed to put in place a Sale & Leaseback funding structure covering industrial assets to provide the company with €400K in “cash”. This operation rendered various benefits: firstly, it funded the company by using existing industrial assets as collateral, through a transaction not recorded on the CIRBE or the balance sheet of the company. The operation had a fixed rate term of 5 years, improving the company’s debt structure. The company financial ratios improved, and eventually, the funds were provided by an International Entity outside the company existing banking pool.
LB subsequently succeeded in entering into another Sale & Leaseback agreement for an industrial asset valued at €1 million. This operation generated further benefits (in addition to those mentioned above), in that the money came from a “non-bank” entity, leaving the company’s access to bank lending unaffected.
The company has improved and stabilised its balance sheet structure, without increasing its debt levels or worsening its CIRBE score. The financial effect on the company is highly positive. Banks perceive a better risk situation, and are now becoming more receptive, presenting better offers.
The company is aware of the funding structure value-added and so is calling on our collaboration for funding its new investments.
Entities that previously did not want to take part in these operations are now finding them attractive, and so we can obtain lower funding prices.
Client in the food sector with a modern production facility. Fairly leveraged with a Debt/EBITDA ratio in 2013 of around 5x and a DSCR below 1x. Despite the relatively high leverage and financial stress, the evolution of EBITDA and the competitive dynamics of the business were positive.
At that time the company could not secure long-term financing, as the banks adopted a prudent approach offering only short-term loans. This meant that the company needed alternative long-term funding in order to grow and improve its competitiveness.
LB managed to implement a Sale & Rent-Back agreement for industrial assets worth €4 million. This operation offered various benefits: firstly, it was not recorded on the CIRBE or the balance sheet of the company. The money was used to repay short-term debt, reducing the company leverage; the agreement was signed for a term of 5 years, thereby improving the debt service ratios. Finally, the funds were provided by an International Entity from outside the company’s banking pool.
The company improved its EBITDA without increasing its leverage, allowing it to receive better offers from banks. In late 2014 it was able to refinance all its debt on better terms.
Although the costs of the sale & rent-back product became high compared to bank financing, the client did not wish to forsake the benefits of the product.
LB refinanced the operation and reduced the margin by 150bp. The client was grateful for our efforts, seeing us not only as capable of resolving problems in adverse situations, but also as a reliable provider of a good product at competitive prices.
Situation in 2015:
The company continues to improve its EBITDA without increasing its debt levels, thanks in part to the fact that it has maintained its operation with LB rather than replacing it with debt. The banks are continuing to reduce the cost of funding.
The client had a complex energy efficiency operation amounting to €5 million that did not want to record on its balance sheet or against its CIRBE score. It also preferred a non-bank operator.
LB offered a €2 million operating lease facility for new Capex at a price similar to the cost of debt. Meanwhile, LB processed the €5 million operation with one of its funds, at a price higher than the cost of bank debt, but lower than the cost of funding from debt funds.
LB had an advisor role in this operation, which was financially and technically complex.
Company engaged in the manufacture, manipulation and marketing of all types of paper and cardboard, and packaging and sale of aluminium and cardboard trays.
Its average debt ratio was around 70%. Between 2008 and 2010 the company was in insolvency procedures. However,over the last three financial years the company has become profitable again. Nonetheless, it has a DSCR below 1x, and the bad reputation brought along by the insolvency procedures.
Meanwhile, the prior analysis revealed an initial PD according to the company’s characteristics of 4.88%
Analysis and final decision:
LB performed a quantitative and qualitative analysis of the transaction taking into account: the valuation of assets, the analysis of financial, tax, legal and employment risks, and the competitive analysis of the Due Diligence.
Based on the conclusions drawn from the Due Diligence, the company’s rating was modified.
After the analysis, the PD was reduced substantially to a level of 3.34%.
The agreement was ultimately signed, with LB financing €10 million + VAT on an asset valued at €14 million (LTV = 70%).