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How Investec facilitated stage payments and foreign exchange to help eCORRUGATED grow their business with a new packaging line.
Deal value: £400,000
Asset type: Machinery
Broker: PMD Business Finance
eCORRUGATED, one of the largest manufacturers of corrugated boxes, were looking to invest in a third facility line that would be able to produce a larger corrugated box and print with five colours instead of just three. The additional line would open up new markets and revenue streams for eCORRUGATED. The directors at eCORRUGATED had been made aware of a 1998 Emba Packaging Line that had become available in the market and was available, fully refurbished, at a cost of £480k.
A deep understanding of aged hard assets and the complexities of the project identified Investec as a potential funder.
There were various challenges including foreign supply routes and the request for stage payments in Euros whilst the equipment was still overseas. This comprised of 20% deposit, followed by three stage payments and then 10% retention payment due to supplier 30 days after commissioning - terms that a lot of other lenders in the marketplace wouldn’t be prepared to facilitate.
Whilst clearly a quality business with a great growth strategy, eCORRUGATED had recently undertaken an MBO and as such had quite a minimal and highly leveraged balance sheet, which might typically dictate requirement for Directors Guarantees. PMD were made aware from the client of a ‘5 Year Supply and Partner Agreement’ which included a guarantee of a 7% EBITDA margin which would be controlled by the input prices of raw material and controlled terms of credit.
Ultimately, our in-depth understanding of the key financial aspects, commitment to working with the Broker to shape the deal and our internal asset management team understanding of the true security on the machine is what cemented the deal.
“I’m pretty confident no other funder, certainly in the Tier 1 space, would have supported this client in the way that Investec did… One of the key aspects for both PMD and Investec being able to support this client was the understanding of the project right through the different levels at Investec. From Stu Hughes, who got under the skin of the deal to help me shape it, to Paul Johnson who had the experience and knowledge to understand the key financial aspects and Investec’s internal asset management team who understood the true security on the machine despite the 1998 original year of manufacture”.
- PMD Business Finance
One of the key aspects for both PMD and Investec being able to support this client was the understanding of the project right through the different levels at Investec.
The machine has now been in situ for the last three months and has enabled eCORRUGATED to grow into new markets, both with their existing customer base and they are projecting an uplift in revenues for the current financial year.