TradeCap Partners Provides $4,200,000 PO Facility for Consumer Products Importer

TradeCap Partners, LLC (“TradeCap”) structured a $4,200,000 PO facility for a consumer products importer to support seasonal promotional programs with multiple retailers.

After a decade of success and top line growth, a decision to expand into a new product line, coupled with two consecutive years of declining sales in a core product line, the Company found itself in troubled waters. Declining cash flow and negative net working capital resulted in a default under their asset based line of credit with a regional bank. The bank restructured the credit facility and termed out the airball created as a result of the reduced receivable and inventory base.

The Company secured seasonal promotional programs with two of its largest customers.  The programs expanded the SKU count as well as the store count resulting in larger purchase orders than they had historically received. While this represented a growth opportunity, it also presented challenges. Terms with suppliers were stretched and cash flow was further constrained by the debt service associated with the term loan supporting the airball. Although the Company was meeting increased debt service obligations, covenant defaults remained and the bank had no appetite for extending additional credit to support the seasonal needs. The bank was committed to riding through the difficult times with their client but needed a partner to provide a solution to meet the increased seasonal cash flow needs.

Having worked with TradeCap on a similar engagement with another client, the bank contacted TradeCap for help.  TradeCap utilized the previously negotiated Intercreditor Agreement to carve out the purchase orders related to the seasonal programs and structured letters of credit with two suppliers to support overseas production of the products. TradeCap also provided capacity to support ocean freight, duties, tariffs and inland logistics costs up to the point of delivery to customers.

TradeCap’s solution benefitted both the Company and their bank. The Company was able to execute on the larger seasonal programs with two key customers despite cash flow constraints and the default with their bank. The bank was able to provide a solution to their client through their relationship with TradeCap, accelerate repayment of the airball term loan based on profitability of the programs and bring them back in formula under their asset based line of credit.

TradeCap has a great deal of experience in working with the special assets and workout groups of banks and asset based lenders to structure bridge financing for clients with additional capital needs to generate sales”, said TradeCap’s Managing Partner Clinton Stanton. “As we get deeper into the credit cycle, we’re being introduced to more and more companies facing similar challenges and seeking a solution to overcome them.  TradeCap is committed to serving as a trusted partner to our colleagues in the finance industry and their clients to provide those solutions.“