An established New Zealand construction product supply and installation business had traded for more than 20 years. A sharp slowdown in the construction sector had materially reduced turnover, but the business had already responded with a significant cost-cutting restructure and operational changes to reset its operating base.
Behind the numbers was an experienced director with a strong understanding of the business, its forecasts and what needed to change, together with a clear commitment to making the restructure work.
Revenue had fallen from $5.56m in FY25 to $3.55m in FY26, and the FY26 accounts still showed a loss position. At the same time, the business was carrying two high-cost, short-term business loans and needed to refinance them and create working capital headroom. Its senior bank was not prepared to extend further lending while the reported accounts remained in loss.
Importantly, the client was not asking a lender to fund a turnaround that had yet to begin. The key restructuring decisions had already been made and implemented, and the financial information and forecasts were beginning to show the business moving in a positive direction. The client also supplied a detailed information pack promptly, allowing the position to be assessed efficiently.
A $500,000 secured term loan was structured to replace the expensive short-term facilities and provide working capital while the completed restructure flowed through. Although the historic FY26 result was weak, the assessment could look beyond that point-in-time result to the actions already taken, the emerging impact of those decisions and the adjusted post-restructure earnings. On that basis, projected DSCR was 1.39x against a 1.30x policy threshold.
The director's experience, grasp of the numbers and demonstrated commitment to the business were also relevant to the assessment. Combined with the detailed forecasts and promptly supplied supporting information, this gave Line Capital greater confidence in the forward position. The facility was further supported by GSA security over the borrower group, personal guarantees and the guarantor's property as a second way out.
FY26 revenue was $3.55m, down from $5.56m in FY25, with reported EBITDA moving from $489,548 to a loss of $794,211. The forward assessment adjusted for the completed restructuring, producing EBITDA of $724,729 and a 20.4% margin.
Post-refinance annual debt commitments were $527,310, with projected DSCR of 1.39x. The key point was that the historic accounts reflected the contraction and restructuring period, while the adjusted position - supported by changes already implemented - provided a more relevant view of ongoing servicing capacity.
Funding structure: $500,000 secured term loan | 60 months | 19.00% fixed | GSA over the borrower group plus personal guarantees.
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