Overcoming Debt Funding Challenges

Client: A media company (“MediaCo”)
Investment Objective: Entertainment and Media

Challenge: MediaCo was seeking to secure debt funding for their development of a new entertainment hub (“New Venture”) which will allow MediaCo to diversify its business interests. Given this new venture, MediaCo needed assistance in securing debt funding to finance the proposed New Venture. A lack of debt funding will present a significant hurdle in achieving their diversification and growth objectives. The main challenges in securing the desired debt funding were:

  • Lack of a comprehensive business plan for the New Venture: The client’s existing business plan lacked clarity and detail, failing to effectively communicate their vision, growth strategy, and financial projections from a lenders’ lens.
  • Non-detailed financial presentation: The client’s financial information was not presented in a way that allowed lenders to easily understand assumptions and business outlook, making it difficult for lenders to assess the New Venture’s financial health and creditworthiness.
  • Limited understanding of lender requirements: The client lacked a clear understanding of the information and documentation typically required by lenders to evaluate potential borrowers in respect of this kind of project financing.

Solution: We adopted a holistic advisory approach to address the client’s challenges and help them secure the necessary funding. Our strategy involved:

  • Identifying and understanding the core issues: We collaborated closely with the client to diagnose the root causes hindering their success in raising debt capital. This involved interactive discussions, analyzing existing documents, and identifying areas for improvement.
  • Development of a robust business plan: We assisted the client in crafting a comprehensive business plan that clearly outlined their business model, market analysis, strategic plan, and critically, financial forecasts. These forecasts, including revenue projections, profit margins, and cash flow statements, were presented in an easy-to-understand manner and standard banking terminology.
  • Addressing business and financial risks: We collaborated with the client to create an information paper that specifically addressed any potential business and financial risks identified during the analysis. This document demonstrated transparency and proactively mitigated potential concerns lenders might have. We also worked with the bank to structure a workable financing solution for the client where certain financial support was secured from other parties as well as ensuring covenants were balanced, appropriate and relevant to the level of risks.
  • Lender presentation and communication support: We provided guidance and support to the client in preparing for meetings with potential lenders and thereafter, their negotiations with lawyers. This included coaching them on how to effectively present their business case and negotiate on terms and conditions of the loan and address any questions from lenders with confidence.

Outcome: Through our holistic approach and collaborative efforts, MediaCo was able to successfully secure the desired debt funding. More importantly, they achieved their funding objectives, positioning their business for continued growth and success.

Key Takeaways: This case study underpins the importance of:

  • A well-defined business plan: A clear and concise business plan is essential for attracting potential investors and securing funding.
  • Professionally presented financials: Adherence to accepted financial reporting standards is crucial for building trust and demonstrating creditworthiness.
  • Understanding lender requirements: Knowing what lenders look for and addressing potential red flags upfront can significantly improve the chances of securing funding.
  • Collaboration and advisor expertise: Partnering with an experienced advisor can provide valuable guidance, support, and expertise in navigating the complexities of securing debt financing.

By adopting these strategies and leveraging an integrated approach, we were able to help MediaCo overcome their debt funding challenges and achieve their business goals.