Case Study – Funding Succession Planning for Director of Company
Funding Succession Planning for Director of Company
Finance was required to buyout a retiring director from a profitable long established service industry business. The funding required a payment to the retiring director of $900,000 (for entitlements and purchase of his equity in the business), to refinance of the existing Bank facilities of $850,000 (to release the mortgage securities over the director’s homes) and additional Working Capital to assist with the expansion of the business.
Service Industry operating for over 20 years.
Annual turn over $24.00M profitable
Trade debtors $2.00M
Four directors, one over 65 years of age wishing to retire.
Existing Bank Facilities
Overdraft - $0.600M
Commercial Bills - $0.250M
Total - $0.850M
Collateral mortgages over all directors homes
Debenture over business
Entitlements to retiring Director - $0.300M
Purchase of Ret. Directors shares - $0.600M
Additional Working Capital - $0.400M
Total Funding needs - $2.150M
AFNCF Refinance Package Solution
Receivables Finance to 80% of Debtors - $1.600M
Finance remaining directors' homes - $0.550M
Total Refinance Package - $2.150M
1. The receivables facility was secured without using the Directors homes as collateral security.
a. Facility Agreement
b. Debenture charge over the company
c. Directors Guarantees
2. The finance for the remaining directors to purchase the shares was arranged through a different lender - to ensure that the homes /loans were not captured under an all-monies clause of the business finance and were not cross collateralised.