Client wanted to prepay publishers (supply) to lock in lower rates (CPMs) ahead of Q4 busy season. They were tapped out on their senior facility with their factoring company, due to some late receivables. So they were unable to access capital to take advantage of this opportunity. Knowing if they can prepay publishers they’d lock them in for a long-term contract, the opportunity cost was too great. To make things more challenging, senior creditor required a signed intercreditor agreement between them (Asset Based Financing partner) and the new, junior lender (Sales Based Financing partner). This inevitably adds 3-21 days to the process, depending on how aggressive the parties lawyers wish to be. The client had to be extra cautious which capital path to go down, in order to not end up on a road to nowhere, and then it be too late.
- Negotiated intercreditor on behalf of new and existing financing companies
- Secured subordinated sales based financing deal, protecting Senior’s collateral
- Client locked in new, discounted supply on 3-5 year contracts
- Capital Desk invested in the transaction to avoid moral hazard
The CEO, who signed the deal, only owned 1.00% of the company. Through our desk, we negotiated removing the personal guarantee, and replacing it with a corporate and validity guarantee. The rationale is that no one felt like the CEO should be guaranteeing the transaction when they only own 1.00%. We de-risked the transaction for the borrower, came up with a similar protection for the sales based financing partner, and stood behind the deal by investing in it.
- Client locked in new publishers at discounted CPMs
- This materially increased margins during Q4 demand for the same CPMs
- Client used growth in new receivables to finance with their asset based financing partner
- Asymmetrical returns for the client, when compared to the investment in fees on the transaction.
