Capital. Speed. Certainty.
Case Study: Creative ABL Recapitalization Solves a Challenging Special Assets Situation
Case Study: Creative ABL Recapitalization Solves a Challenging Special Assets Situation
Special Assets Exit: Non-Bank ABL Financing Arranged / Referring Bank Wins Treasury
Executive Summary
The Company was transferred to its bank’s special assets group following a period of operating stress:
- Revenue decline — Customer order volume softened as purchasing decisions were delayed amid market uncertainty and concerns around higher tariffs
- Margin compression — Input cost inflation and operating inefficiencies pressured profitability
- Working capital strain — Slower collections and tighter liquidity created cash flow pressure
- Covenant defaults — Performance deterioration led to default under the incumbent credit facility
The issue: Traditional bank ABL structures could not generat
Client: West Coast Based Specialty Manufacturer
Transaction Type: Asset-Based Lending Facility – Debt Recapitalization
Total Financing: $12.0 million ABL Facility
Essex’s Solution
Essex sourced the new debt capital from an independently owned specialty finance company, not a bank. This enabled the client to obtain the financing needed to exit special assets, while separately moving its treasury management relationship to the bank that referred the opportunity to Essex.
Essex also acted as a third-party negotiator with the existing special assets group and helped structure a closing path that worked for all parties. Essex negotiated:
- A favorable soft note taken back by the exiting bank
- $500,000 of opening availability to support liquidity at closing
This structure was critical to getting the transaction closed.
Key Elements of the Solution
- 90% AR under 90 days
- 60% inventory including WIP — a meaningful enhancement, as many lenders exclude WIP entirely
- 80% equipment NOLV
- Non-recourse — no personal guarantee required
Strategic Outcome
- Clean exit from special assets through a negotiated recapitalization
- Non-bank specialty finance lender provided the debt capital
- Referring bank won the treasury relationship without taking credit risk
- Client received liquidity at closing and a more workable capital structure going forward
Deal Structure
COMPONENT
TERMS
Facility Size
$12.0 million ABL revolving credit facility
Term
3 years
Pricing
SOFR + 525 bps, 1.0% facility fee
AR Advance
90% of under 90 days
Inventory Advance
60% (including WIP)
Equipment Advance
80% on NOLV
Recourse
Non-recourse
Capital Source
Independently owned specialty finance company
Why Essex?
Most capital providers could not solve the full situation. Essex delivered:
Advantage
Impact
Specialty finance relationships
Identified the right non-bank ABL capital source
Creative structuring
Built a refinance that addressed a difficult funding gap
Workout negotiation
Negotiated directly with special assets to create a viable closing path
Banking alignment
Helped the referring bank win treasury business without underwriting the credit
