Case Study

MBI through and Sterling

Adreco Ltd, a highly successful plastic injection moulding company, borrowed £250,000 in March 2013 at an interest rate of 9.97% using It was ThinCats’ flexibility and openness to corporate finance deals that enabled the deal to happen and helped support the management buy-in to go ahead with great results for all.

Sam Hill, managing director of Adreco, believes that the peer-to-peer lender’s approach was vital in securing him the funding he needed. “I have considerable experience in the plastics sector and decided it was time to acquire a quality business which I could develop. Banks were not interested in assisting as they tend to have a natural aversion to MBI transactions, and they seem to lack the expertise in understanding such transactions at the lower end of the scale. I was amazed at the commercial approach to my transaction taken by Sterling Capital Reserve Ltd and ThinCats, as well as the flexibility and the speed at which the funding was in place.”

Benefits for those seeking corporate finance

David Griffiths, managing director of sponsor Sterling Capital Reserve Ltd observed that: “Over the last few years, lack of bank finance and appetite has had a severe knock-on effect in the corporate finance sector. This isn’t just the multi-million pound deals, but those normal transactions, including management buy-outs, management buy-ins and corporate acquisitions at the lower end of the scale, typically for businesses in the £1m to £15m turnover range.”

Sterling Capital Reserve Ltd, commercial and corporate finance advisers, has offices in Nottingham and Sheffield, and is one of the original sponsors. The network of sponsors, experienced financial services professionals who vet and monitor deals, has developed rapidly since ThinCats was founded in 2011. Sterling, however, has consistently used ThinCats funding for clients as an alternative method to banks to fund corporate finance transactions.

One of the flexible aspects of ThinCats loans is that they can be used for any commercial purpose. Deals for MBO’s, MBI’s, corporate acquisitions and, in the right circumstances, bank manage-aways and prepack administrations have all been facilitated on the platform. They are supported by lenders who, as experienced investors, realise that business needs are variable and that each proposal should be examined on a deal-by-deal basis rather than taking the more mechanical approach of the high street banks.

David added: “We are now able to provide a line of funding to transactions that can complement and blend with other funding lines including invoice discounting, asset finance and commercial mortgages to get away transactions that would otherwise flounder. As corporate finance advisers, this alternative funding line will become more and more prevalent in funding corporate finance transactions, as the individual lenders have far more empathy with the proposed transaction than most banks and are therefore willing to take a commercial viewpoint.”

The sponsor system is particularly valuable here for both lenders and borrowers. The sponsors
have a responsibility to present quality proposals that stand up both commercially and financially.
This can only be assessed by thoroughly understanding the transaction and stress testing
financial forecasts to ensure any transaction is robust. For borrowers it means a professional
understanding of the needs and requirement of the business, combined with an open-minded approach to getting the deal done.

Flexible funding for success

Adreco Ltd, a ThinCats borrower based in Milton Keynes, has seen manifold benefits of using
Sterling Capital Reserve and ThinCats. Sam Hill, managing director of Adreco, borrowed £250,000 over five years from ThinCats in order to complement ABL finance to effect the management buy-in of plastic moulding business Adreco Ltd. Adreco was founded thirty-five years ago and when its founder retired Sam Hill stepped in to buy the business.

The company specialise in plastic injection moulding and toolmaking, supplying moulded components in a wide variety of thermoplastic polymers and toolmaking services to top flight plastics processors in the UK. They offer a complete service from product design to manufacture and packaging, having an excellent reputation within the marketplace.

Since the funding was drawn down and the buy-in completed, Adreco has seen rapid development and success. Sam Hill explains, “Since the buy-in we have developed new products, secured orders with new clients and will see Adreco Ltd develop into a serious plastics product manufacturer for many household names. Without the ThinCats funding this would not have been possible and I would highly recommend the service to other corporate finance clients and business borrowers.
This is far from a finite stream of finance. As part of an exciting and rapidly developing funding
sector, the constant increasing number of lenders leads to more funding availability and the appetite for larger deals. As a result ThinCats now have over 2,000 lenders and since inception have loaned £35m across 152 deals. The company holds the record for the UK’s largest commercial
peer-to-peer loan at £2.05m and is developing more innovative and exciting products that will
broaden its appeal to lenders and borrowers.

According to Kevin Caley, managing director of ThinCats, financial advisors and corporate finance clients should consider peer-to-peer as an integral part of their approach to funding.
“The individualistic approach of ThinCats and sponsors such as Sterling means that businesses looking for funding should consider us as one of their first ports of call. Our ability to facilitate complex and unusual deals means that fundsare available even when the banks are out of the question.”