TradeCap Partners established a $3 million supply chain finance facility for a Texas based lighting and fixture manufacturer. The company designs lighting displays and fixtures for the largest retail chains in the U.S. and manufactures them both domestically and overseas through long standing supplier relationships.
While sales had been consistent over the years, the business had to adapt to the ever changing retail environment and retailer initiatives to increase foot traffic in stores. One of the company’s largest customers planned an all-store lighting retrofit of its food cases, switching from incandescent bulbs to LED, in order to reduce energy costs, refresh the lighting appearance and lower future bulb replacement costs.
TradeCap’s client worked with a domestic LED light supplier to design a fixture to meet the retailer’s needs. Despite the long standing relationship with the supplier, initial costs associated with the all store rollout were significantly larger than the supplier was comfortable supporting on terms. Unwilling to provide cash deposits, TradeCap’s client negotiated with the supplier to accept a letter of credit. The client’s senior lender contacted TradeCap to help facilitate the letter of credit financing request given it wasn’t comfortable with the additional pre-shipment exposure and the request exceeded their current borrowing base.
TradeCap structured a letter of credit that satisfied the supplier’s credit requirements and provided flexibility to support its supply chain for components needed to complete production. TradeCap expedited underwriting, established an intercreditor agreement with the senior lender and subordination agreements with multiple junior creditors and issued the letter of credit to ensure the client will meet the critical delivery dates required by its customer.
