U.S. Modular Taps Snowbird Capital's Mezzanine Fund to Increase Production Capacity, Expand Management Team
--Deal Features Use of Snowbird Capital's Reversible Warrants™--
CASE STUDY
U.S. Modular, a provider of high quality data storage products for industrial and consumer applications had a problem. Four years after its creation, the company was growing too fast for its existing capital structure and its physical plant. The company required more equipment, manufacturing space and an expanded management team. Capital was needed to grow the business, but options were limited.
Many of the venture capitalists U.S. Modular spoke with weren't particularly interested in a company that was no longer in its early stages. Others expressed interest but wanted to take a big chunk of the business as a condition of the investment. Senior lenders were only willing to offer asset-based lines of credit that didn't fully meet the company's short term demand for cash. A solution was not yet in sight.
Fortunately, help was on the way. An intermediary familiar with U.S. Modular's rapid growth and demand for cash heard about Snowbird Capital, a company specializing in mezzanine funding that bridges the gap between senior debt and private equity. Soon, U.S. Modular was in discussions with Snowbird Capital about how to structure the missing piece of financing.
According to U.S Modular's intermediary, "Snowbird provided attractively-priced capital quickly with fewer strings attached, allowing strong management teams to succeed."
The discussions moved quickly and, within weeks of the initial meeting, U.S. Modular had agreed to a loan. The loan featured Snowbird's innovative Reversible Warrants™, which allowed U.S. Modular to significantly reverse the equity position granted to Snowbird in its financing.
U.S. Modular Founder & President Nick Payzant said, "Snowbird's terms were considerably more attractive then the offers I've reviewed from other mezzanine providers."
In addition to the terms of the loan, flexibility, execution and ease were of critical importance for the completion of the deal. Since other mezzanine capital providers had a reputation for taking months to deliver capital, U.S. Modular was pleasantly surprised with how quickly Snowbird made the funds available.
U.S. Modular's accountant Albert Vinas of Simpson and Vinas Company said he "was surprised by the speed of the transaction and how smoothly everything came together. Snowbird Capital is by far the most responsive capital provider that U.S. Modular has ever worked with."
Once the deal was in place, U.S. Modular was able to upgrade its manufacturing facility from 5,000 square feet to 10,000 square feet. The working capital also allowed U.S. Modular to add new machines required for production and add a VP of Operations and a VP of Finance to help manage the growth.
U.S. Modular Founder & President Nick Payzant commented, "Snowbird Capital was the perfect solution for U.S. Modular. By helping us double our operational, administrative, sales capacity and infrastructure in a short amount of time, Snowbird has allowed us to increase our projections for 2005 revenue by about 30 percent. In two weeks, Snowbird outperformed every other mezzanine capital provider we've ever talked to and demonstrated a willingness to negotiate and build a deal around our specific needs through the use of its innovative Reversible Warrants™."
Snowbird Capital Founder, Chairman & CEO Nelson Carbonell said, "We are pleased to have provided the working capital U.S. Modular needed to continue to grow its business while substantially reducing the dilution of ownership typically associated with private equity financing. The use of Reversible Warrants™ with this particular deal will allow U.S. Modular to reduce the equity stake granted to Snowbird, which as a business owner, is really something to get excited about."
Visit the U.S. Modular web site.
Snowbird's terms were considerably more attractive then the offers I've reviewed from other mezzanine providers.