Recapitalization Financing

December 2022 - April 2023

Our client owned 46% of a middle market business. His father owned the other 54%.

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The client wanted to buy his father out, and his father wanted to retire.

The recapitalization required $20M in outside financing.

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Initially we considered an equity raise for the buyout but decided that he wanted to avoid dilution.

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Next, we considered credit funds, but rates were too high: 13%-15%

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Next, we considered SBA loan funds, but rates were still too high: 11%-15%

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The biggest problem: motives weren’t aligned.

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The funds wanted the business to pay as much interest as possible, imposing prepayment penalties if the company was successful and wanted to get out of debt.

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Symphony was asked to help find a solution. We connected the business to a middle market bank that we are close with. The bank had never done a loan in this business sector, so they initially had reservations.

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Interests indeed aligned, though. The bank was intrigued after hearing that the business was intent on paying off the loan as soon as possible.

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After a few intense months of hand-holding and relationship building, including a transformative meeting between the owner, the new CEO of the business, with the CEO and CCO of the bank at the bank’s HQ, we got a draft term sheet for a $20M term loan with very reasonable covenants.

We were able to reduce the interest rate to SOFR+3, which was about 7% at the time, a savings of 4%-6% on $20M, or $800,000-$1,200,000+ in year one.

Over a 3-5 year time horizon on payback of principle, the business will have saved millions of dollars in interest.

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Symphony also lead a process to find deal advisors, including an accounting firm to provide the Quality of Earnings Report, and the law firm to draft the loan docs.

Reductions on advisory fees were an additional 6 figures of savings based on initial quotes.

Symphony charged a below market fee to place to the loan and avoided origination fees, delivering another standalone 6-figure savings to the client relative to the fund route.

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We are thrilled to announce that this was a win-win-win for all parties.