California Produce Grower

Summit was approached by a middle market investment bank to assist an over-leveraged agricultural company provide an exit to its bank lender, restructure its balance sheet and provide working capital liquidity.

Industry:  Agriculture

Subject:  Middle market California based produce grower

Circumstances:  Through an investment banking intermediary, Summit worked with the equity holders of a private company to acquire six debt tranches totaling $52 Million, held by a national bank interested in exiting the credit by quarter end. The company had experienced significant labor cost issues in prior periods, leading to margin deterioration, negative operating cash flow and a consequential increase in funded debt. Debt/EBITDA was in excess of 8X at the time Summit was engaged. In addition to the debt purchase from the national bank, the company required a committed Asset Based Loan (ABL) facility to be funded shortly after the debt purchases to finance critical vendor purchases in advance of the company’s key annual growing season.

Solution: Prior to acquiring the bank debt, Summit and the equity holders agreed in principal to the terms of a post-closing balance sheet restructure which included a new ABL. At the same time Summit addressed the bank’s requirements by providing a quick close.

Outcome:

• The balance sheet restructure was completed post-closing on the pre-agreed terms and the new Summit ABL allowed the company to ramp up production for its peak growing and selling period
• The company’s performance has improved significantly as a result of a right sized balance sheet, operational improvements executed by a now focused management team and a capex program implemented to drive improvements in productivity
• Summit was then able to assist the company in refinancing the Summit ABL with a national bank at attractive rates
• The company is looking to refinance Summit’s transitional term debt with more ideally priced senior secured debt in the near term
• Summit continues to work collaboratively with the Company and has maintained a strong working relationship with the stakeholders