RECENTLY FUNDED | $3MM Commercial Real Estate Bridge Loan | Industrial Packaging Client | CT
LOAN CASE STUDY: Speritas Capital Partners helps an owner-user of an industrial packaging property in CT buy time to restructure using a tactical, short term commercial real estate bridge loan, saving 60 CT jobs.
THE SITUATION: This 30 year old New England packaging company had recently gone through some hard times, unrelated to the pandemic, and cash flow was very tight.
As a result of weak performance, the company had breached a financial covenant in their loan agreement and their bank was eager for the company to repay the loan or somehow get the loan off its books.
The company brought in a certified restructuring professional to help put the company on a path of profitability.
In situations like this, a restructuring professional will often assist with lowering operating expenses, renegotiating vendor debts, improving topline revenue and assisting with other balance restructuring needs. It is a critical first step in the refinancing process.
Bridge Loan Financing Challenges
Given the company’s cash flow situations, the company was unable to repay their existing bank loan.
A discounted payoff had to be arranged and agreed upon by the company’s current bank.
The company also needed to identify a new lender who could understand the business model and the turnaround strategy and who would not focus solely on past performance.
Speritas Capital’s Role - Funding Solutions
This is where Speritas Capital came into the story, with the jobs of 60 employees at stake during a pandemic.
Speritas Capital was asked to identify a new lender who could analyze both the value of the owner-occupied commercial real estate and the ability of this operating company to service the new bridge loan going forward.
Finding the right lender was challenging because many commercial real estate lenders are only able to underwrite loans involving investment real estate such as office property, multifamily or mixed use buildings, NOT owner-occupied industrial properties.
When reviewing non-owner occupied real estate, the credit analysis relies on the predictability of rental payments and building operating expenses. These are relatively easy to review & analyze.
In owner-occupied situations, the credit analysis must rely on the predictability of the borrower’s customers, the borrower’s operating and capital expenses. These factors are much harder to analyze.
The role of Speritas Capital in this debt financing was to look beyond traditional funding sources to identify financing options and lenders who could enthusiastically support the turnaround and position the company for long-term growth and success.
Digging deep into our lender relationships, Speritas Capital was able to bring in a nonbank bridge lender – a unicorn for the situation – who not only understood the market, the geographic area, and turnaround situations, but also had experience in discounted bank payouts.
Identifying and matching the right lender to challenging financing situations is what Speritas Capital Partners does best.
Questions about bridge loans? Call or text 203-247-4358, send an email, or schedule a call now with Speritas Capital CEO, Jeff Bardos.
Bridge Loan Strategies with Nonbank Lenders
Commercial real estate bridge loans are often underutilized as a strategic solution in times of financial stress.
The $3MM bridge loan for our industrial borrower was a strategic, short term tactical decision to provide the company time for the restructuring to yield an improvement in EBITDA.
The use of a short-term, 12-month bridge loan was part of the broader restructuring effort already underway, which involved expense reductions, a shorter cash conversion cycle and a balance sheet restructuring.
Once performance stabilizes, the company can refinance the bridge loan with a longer term, lower cost loan.
Finding the right lender: In this case, the new lender had to be an alternative (nonbank) lender because a bank will not agree to pay off another bank at a discount. That’s a really hard thing for a bank to explain to it's bank regulator!) So this had to be a nonbank bridge loan.
Read More about the Strategic Use of Bridge Loans
About this Real Estate Bridge Loan
There were three parts to this transaction:
Refinancing of the accounts receivable and inventory line of credit
Cash out refinancing secured by an owner-occupied, light industrial property
Repayment of a commercial mortgage at a discount
“This was a complicated financing situation and Speritas brought a lot of value with their background in bank regulation and their understanding of what banks can, can’t, or won’t, do.”
“The outcome couldn’t have been better. Speritas Capital Partners was able to do something we couldn’t – find the right lender.”
Conclusion – Post Finance Update
The bridge is working as planned - as a short term, tactical strategy. The company’s performance is improving and Speritas Capital has begun the process of refinancing the bridge loan with a 30-year permanent financing.
60 CT jobs saved!
Are you looking for a strategic partner to advise you on your next Commercial Real Estate Bridge Loan financing challenge?
The Speritas Capital team is always happy to hear your story, learn more about your financing needs and answer your questions. We bring our 30+ years of banking experience and our transparent, strategic approach to every client and every deal, both large and small.
And we never take up front fees.
CONTACT INFO
Jeffrey Bardos
CEO Speritas Capital Partners
Call/text Jeff at 203-247-4358
Email Jeff with your ABL financing questions
Schedule a call with Jeff using our online scheduling tool.
More about Jeff
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