Food manufacturer invests in modern infrastructure
Borrower:
UK Corporate Structure
Loan amount:
£18m
Term:
15 years
Repayment:
Capital and Interest
Security:
Commercial property
Loan to Value:
60%
Interest rate:
2.35% over bank base
Summary
A fourth generation family business was introduced to Ashbridge Partners by their London lawyers.
Over recent years they have identified the need to rationalise their food storage facilities to drive down costs and improve efficiencies. Therefore, a new state of the art storage facility was sought. This investment would not only reduce labour and transport costs but also free up existing inefficient sites that could be re developed.
Our ability to understand the long term family objectives and construct a banking request that met lenders requirements, delivered a funding package which included an initial interest only period to accommodate the development phase.
Goal
Our clients have a history of funding their investments and improvements with cash because they are extremely prudent and recognise the risks associated with large sums of debt. However, their existing inefficient systems of storing and moving food product came with its own risks; product couldn’t always be moved quickly enough to meet customer demands and the logistics of multiple human handling was eating into profit levels. Therefore, the proposed new facility would reduce operational costs sufficiently to construct and fund it.
Challenges
Any lender would need to understand, beyond doubt, the financial argument for this significant investment and be convinced it could be self funding. We were able to utilise our consultancy skills and those of our accounts analysts to model the existing and future business performance. This data allowed the lenders to scrutinise the request and get comfortable with it as a concept. We also performed a sensitivity and risk analysis to support our report.
Added Value
- Our client has significantly improved the robustness and resilience of their business for future generations.
- They have rationalised their labour requirements whereas before they were struggling to recruit the desired number of employees on a day-to-day basis.
- The business can now exploit the exciting opportunities for redevelopment of several redundant brown field sites, which may include both residential and commercial development.
- Our detailed risk analysis and financial modelling has been shared with the clients and prompted them to monitor their business in new ways.
Next Steps
We aim to review the loan facilities with this client on an annual basis to check that the structure is working and also as a staging post to keep up to date on the evolving business direction. This will stand us in good stead to assist and react promptly when we are next needed.