US chemical manufacturer secures US$20m turnaround facility to pay down trade debt

First Business Bank has closed and funded a US$20m asset-based credit facility for a Texas speciality chemical manufacturer, providing financing to refinance existing bank debt, reduce trade payables and support a corporate turnaround.

The transaction combines a revolving credit line with an equipment capital expenditure facility, allowing the borrower to address immediate liquidity requirements while retaining capacity for investment.

The manufacturer, which has not been identified, recently completed divestitures and was seeking a lender prepared to assess its revised operating position rather than relying solely on its historical financial performance.

The inclusion of trade payables is an important feature of the financing.

Manufacturers undergoing restructuring can face simultaneous pressure from lenders, suppliers and operational investment requirements. Even where a company has reduced debt or disposed of non-core assets, outstanding supplier balances can constrain the purchase of raw materials and other inputs.

By providing liquidity to reduce those obligations, the facility is intended to support the manufacturer’s ability to maintain relationships with suppliers while executing its turnaround strategy.

The revolving component can also provide flexibility as working-capital requirements change with production and sales volumes. The equipment expenditure line provides a separate financing channel for capital investment.

First Business Bank said its asset-based lending team had structured the transaction around the manufacturer’s current operating performance and future financing needs.

The bank did not disclose the allocation between the revolving and equipment facilities, pricing, maturity, collateral values, advance rates or the size of the initial draw.

Although the bank described the facility as closed and funded, that does not establish that the entire US$20m commitment was immediately advanced.

The transaction illustrates a role for asset-based lending in business restructurings that extends beyond refinancing existing lenders.

Where a company still has productive operations and financeable assets, a carefully structured facility may help it manage supplier obligations and fund ongoing activity while its financial position is being rebuilt.

For lenders, that type of financing also requires close attention to collateral quality, operational cash flow and the execution risks associated with the turnaround.