Project Hawk

Deal Summary

Catalyst has successfully advised a major mid-market engineering Group on a significant re-financing completed in early 2010.

The business was facing circumstances familiar to many others in early 2010 – performing well in a very difficult market where its end customer base had diminished substantially. Despite this they were trading behind their original business plan and this led to pressure on banking covenants which required a solution to be found.

What difference did we make?

Catalyst was asked by the Group Board to advise on the most appropriate way of providing a secure funding structure for the medium term as well as minimal cost impact on the business in the long term.

At the time of appointment the relationship between the board and shareholders with its banking syndicate had become strained. The management team and shareholders had clearly reacted swiftly to the changing market and protected the business from the worst of the economic fall out. However, the banking syndicate believed that the debt facilities provided were now at uneconomic terms and the likelihood of a covenant breach created the opportunity to restructure the debt prices at current market levels.

Our first role was therefore to act as a relationship bridge between the various parties – the shareholders looking to mitigate the costs of a debt restructuring and and capital injection required; the management team keen to provide sufficient funding to allow it to make some sensible business decisions in the market; and the banks keen to see the business on an even keel and price its debt facilities at levels reflective of the current risk profile.

This initial dialogue allowed us to start to identify areas of consensus and to develop a range of solutions that might meet the objectives of the various parties.

Following a number of weeks of work, both with the Group reviewing and challenging its forecasts and in discussions with both the shareholders and banking syndicate, the business secured a successful restructuring. This saw the shareholders limit the quantum of additional equity required, the business retain sufficient finance to make important operational changes to the business and the banks to reduce the risk profile of the facilities provided.

The net benefit to the business of this process resulted in savings to the business of in excess of £1 million.