- Background
PAQ, Inc. and QSI, Inc. (jointly, the "Companies"), affiliated West Coast food retailers, engaged LDA to arrange approximately $105 million in debt financing with three clearly defined objectives: (i) facilitate multiple near term acquisitions and strategic initiatives; (ii) fund a dividend to the Companies' founders; and (iii) implement an institutional capital structure, limiting the need for a personal guarantee from the principal shareholders.
- Financing Challenge
Non-sponsored dividend recapitalization concurrent with multiple acquisitions amid tumultuous capital market conditions.
- Single lending facility for two separate companies with different shareholder bases
created additional complexity.
- Shareholder dividend being paid out concurrently with substantial capital
investments.
- Lack of private equity sponsorship limited the potential sources of capital.
- Solution
Employ a broad solicitation process and identify lenders with industry familiarity and comfort with dividend related transactions
- Rapid solicitation process included nearly fifty senior lenders and over one
hundred subordinated lenders.
- Leverage investor network to prompt a more economic and efficient financing
solution from the incumbent senior lender.
- Create sense of urgency for lenders, driven by acquisition timelines.
- Result
After receiving multiple proposals for each tranche, two of the four acquisitions were delayed, thereby reducing the need for capital
- The lender provided $75 million of senior debt, priced several hundred basis points
below their original proposal, while concurrently expanding the collateral base and simplifying periodic reporting.
- $10 million shareholder dividend at closing with an ability to distribute additional
dividends during the term.
- Founders' personal guarantee significantly reduced and further eliminated
in 24 months.
- Subordinated lender remains available for additional capital to facilitate
future growth.