MidCap Business Credit provides US$10m ABL to paper converter

MidCap Business Credit has closed a US$10m asset-based credit facility for a privately held US paper converter, refinancing existing bank debt while providing additional working-capital capacity that had been constrained under the company’s previous lending relationship.

The borrower, which has not been named, specialises in producing custom paper products for packaging manufacturers. The financing package combines a working-capital revolver with an equipment term loan and will be used to refinance incumbent bank debt while supporting the company’s ongoing operating and growth requirements.

MidCap said the transaction was originated through its Chicago regional office. Ryan Ray, senior vice-president of business development for the Midwest, said the lender had been able to provide a more flexible ABL structure while “unlocking additional borrowing availability” that had been restricted under the previous facility.

The structure separates short-term working-capital funding from finance against longer-lived equipment. For a manufacturing business, a revolving ABL line can provide liquidity as eligible receivables and inventory fluctuate, while an equipment term loan can finance machinery without consuming the same revolving capacity.

MidCap did not disclose the split between the revolver and equipment tranche, the borrowing-base composition, advance rates, pricing, maturity or identity of the previous lender.

The transaction is particularly relevant in a manufacturing sector where companies can face significant cash requirements before customers settle invoices. Paper converters may need to fund raw materials, production and inventory while waiting for payment from packaging customers, creating a working-capital requirement that can expand alongside sales.

MidCap specialises in senior secured asset-based facilities of between US$5m and US$30m for lower-middle-market companies and can combine revolving facilities with machinery, equipment and real-estate term loans.

The US$10m refinancing therefore illustrates how specialist ABL providers can replace conventional bank structures when asset values can support greater liquidity than an incumbent lending arrangement is prepared to provide.