Manage away success story: New ID facility secured to help manufacturing business avoid pre-pack
A new £2 million invoice discounting facility has helped an electromechanical contract manufacturer to avoid a pre-pack sale and work towards a solvent sale in the future.
Established in 1987, the contract manufacturing house supplies control and panel wiring, electromechanical assemblies and cable harnesses to companies across Europe.
With 240 staff at sites across Czechia and the UK, external challenges such as inflation, subdued demand and issues with parts led to the business incurring losses, borrowing more and experiencing cash flow difficulty.
The business had enjoyed a good relationship with their invoice finance provider since 2010, however the prior lender grew increasingly uncomfortable as the challenges took their toll on the business and engaged FRP Corporate Finance, part of our wider Group, to undertake an independent review of the business. Separately, FRP were also engaged by the client to support an accelerated sale process – though the preference was to refinance rather than sell, at that juncture, if possible.
The team at Hilton-Baird Financial Solutions worked closely with FRP and the incumbent funder and quickly identified suitable lenders which would be interested and able to support the business.
As a result of our introductions, a £2 million invoice discounting facility was secured with a new Invoice Finance provider under the Growth Guarantee Scheme (GGS), providing additional working capital to avoid a pre-pack sale, support new contracts and enable the business to work towards a solvent sale in the future.
Clarity and transparency
“Our task was complicated by the fact that a personal guarantee would likely be required from the client to enable any new facility, and this wasn’t something made available previously,” explains Evette Orams, Managing Director of Hilton-Baird Financial Solutions.
“By managing their expectations over the facility structure from the outset, through open and honest communication, we were able to give our client confidence and transparency over the facility which was crucial to the successful outcome.
“We supported both sides by sharing insights with the client on the risks, as perceived by any funder, and by proposing mitigants to both sides, such a proposing limited personal guarantees, which were then conditional to be discharged once certain key performance criteria were met. As a result, the client was happy to sign PGs which were, at the outset, an absolute non-starter.
“Another proposal was that the client retained our FRP colleagues to support them and their new funder on an ongoing basis for as long as needed, ensuring the new funder has clarity and the necessary insight to provide the high level of support they have agreed to – evolving in line with the business’ needs.”
Evette continued: “This case was a superb example of how well Hilton-Baird Financial Solutions and its wider FRP colleagues collaborate to deliver a positive outcome for a business, which was experiencing a torrid time, whilst protecting the risk of the future (now current) funder throughout the manage away process.”
Andy Leopold, Head of Commercial Sales – South, Close Brothers Invoice Finance:
“This was a successful engagement from Hilton-Baird Financial Solutions, where we were made aware of the tight timescales that needed to be met.
“The lead was introduced to us just prior to Christmas and we concluded in the first week of February to all parties’ satisfaction.
“We engaged credit early who attended the first meeting and, following this, Hilton-Baird remained actively involved during the credit process. The challenge remained as to the funding of the business and we agreed to use the Growth Guarantee Scheme to free up the additional funding the business needed.”
