La Brea Bakery was operating near full-capacity
in its existing facility and, therefore, had no capacity
to manufacture and launch its new “store-baked” offering
It’s “delivered daily” product
line was nearing maturity in the Southern Cal
market
The “store-baked” line was designed
for national roll-out
Challenges
The shareholders of the company wanted to pursue
the new growth platform but did not want to provide
personal guarantees or face equity dilution
Most lenders viewed financing the construction of
a new facility for the production of the new, unproven
“store-baked” product line to entail “equity
risk”
There was also concern over the company’s ability
to maintain 85% gross margins
Solution
Principals of FocalPoint put together a comprehensive
private placement memorandum, that was “shopped”
to approximately 50 senior lenders
The PPM thoroughly covered the stability of
the cash flows of the core business
The PPM also highlighted that the new product
line could be a success solely with support from
existing customers in their locations of Southern
California
We presented prospective lenders with a comprehesive
model, down to probability weighted sales by customer,
that showed the company’s ability to repay the
loan under extremely conservative assumptions
We also “coached” management for presenting
the story in a manner that would be well received
by the lender community
While nearly every lender that submitted a financing
proposal asked for warrants, we ultimately were able
to close the deal with no equity dillution
