Problem: The CEO of a local manufacturer owned 10% of
the business and had the opportunity to buy out a passive stockholder’s
90% share. Limited collateral availability prevented the company’s bank
from fully funding the purchase price – leaving a $1,000,000 shortfall.
Response: The Business Development Company
had established an excellent working relationship with the senior bank
through previous deals, and the bank’s officer referred the Company to
the us to fill the gap.
Solution: Working
together, a mutually acceptable financing package was put together. The
bank funded the lion’s share of the purchase price in a first security
position. The BDC provided a $1,000,000 mezzanine term loan,
dovetailing into the senior lender’s requirements (e.g. loan covenants).
Epilog: The CEO gained 100% control of the
business. Two years after the buyout, the Company’s strong financial
performance permitted the CEO to prepay the BDC’s loan.