Wednesday
Oct192011
Small Company Financing Solution for Large Corporation
Wednesday, October 19, 2011 at 12:58PM 
Recently, I met a CFO who, like me, had just missed a flight to Europe because of a delayed connection. That turned out to be fortunate for both of us, because as we were waiting for our next flight, we talked about his large company and his financing problem and found a creative solution to the financing issue he was trying to resolve.
It turns out this CFO is running a leading worldwide manufacturer that supplies companies like Calvin Klein and Diesel. This was a €300 million publicly traded company. However, the company’s European bank was no longer able to provide it with the credit it needed for all of its divisional operations abroad. The smaller divisions were no longer allowed to be part of the parent company’s borrowing base. This large public company had a foreign subsidiary selling directly to the United States. Financing was proving costly for the company, because it was more difficult to perfect title on these accounts receivable assets originating abroad. The company had a modest sales office in the US.
Solution: Big Company in Need of a Small-Company Financing Approach
US Capital Partners advised the CFO to make an inter-company transfer of its merchandise to its US-based company, which then would generate the invoices to its US customers. This resolved the collateral securitization issue. Through this elegant solution, US Capital Partners was able to secure a very reasonably priced credit facility of $6–8 million for the company’s foreign subsidiary, using these newly created US-based assets as collateral.
Many larger companies have divisions that need financing. In today’s lending climate, these companies are finding themselves “underbanked.” Traditional uni-tranche lending from the commercial banks continues to be increasingly difficult to find. CFOs of big companies are increasingly finding themselves in need of small-company financing solutions. If you have financing needs and need expert advisory and solution ideas, contact us at www.uscapitalpartners.net
Reader Comments (1)
Good information to know and right to the point. Thanks for this well written post, i'll follow up for more updates if you keep posting them. Corporate Finance Blog