Steel Company Wins $50 Million in Cross-Border Debt Financing Bid
Client: Vertically Integrated Canadian Steel Products Group
Challenge: Value Highly Vertically Integrated Steel Producer
A heavily vertically integrated Canadian steel company needed a $50 million debt financing loan. The company's various business units in Canada and the United States included a mill plus fabricating plants that produce bar and rod, wire, braided wire and fasteners, as well as munitions casings. The company proposed using its equipment and inventory to finance the transaction but realized appraising it would be complicated by the fact that some inventory was custom work, ordered by specific customers; and that other inventory included standard products sold in a highly competitive market.
AccuVal Approach
Like the owners, the lenders were not confident an accurate appraisal reflecting such a diverse inventory in a cross-border transaction could be done. AccuVal assessed the company, along with its widespread and varying inventory and equipment, and determined that it would be difficult to appraise the assets using a traditional in-place valuation method alone. But it could be done using creative thinking. Assembling a team of seven appraisers seasoned in appraising unique situations in foreign-domestic transactions, AccuVal decided to divide the inventories and separately analyze the factors that affect value. Needing to address both the custom inventory and the commodity nature of the intensely competitive standard-products market, AccuVal proceeded with the appraisal using two approaches. This included valuations of certain assets more readily sold in exchange under traditional liquidation concepts, and valuation of the steel mill assets using in-place, income-based valuation concepts.
Bottom Line: Inventory Valued at $50 Million; Lenders Approve Loan
By applying experience in handling both cross-border transactions and international financing, AccuVal prepared an appraisal report and supporting documentation that would give lenders the ability to monitor the factors that would back the transaction. In addition, for the munitions operation that supplied the government, AccuVal recommended a special scenario in the event of liquidation. The lenders agreed and approved the $50 million debt financing transaction.
The AccuVal AdVantage™
A global reputation for asset-based lending. Deep knowledge of the steel industry and its highly fluid marketplace. Experience with cross-border transactions. The ability to adapt to unusual business situations and find innovative solutions. A name recognized by international investors, money-center banks, venture capitalists and financial syndicators. That's The AccuVal AdVantage™ at work.
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