A global manufacturer of optical lenses, operating from 4 facilities throughout the southeast with $80MM in annual revenue, required support in setting up a centralized corporate office, requiring building acquisition, construction and subsequent consolidated financing. Once business operations were consolidated, business required support in centralizing cash management and aggregating financial operation across its facilities. The requirement for managing cash more effectively also was influenced by the business having borrowings under its working capital facility, while it also had significant trapped cash flow.
Approach & Analysis
- Perform a review and analysis of current facilities and related financing, looking for opportunity to consolidate and create a more efficient borrowing structure.
- Provide options for cross collateralization to minimize borrowing expense, minimize business continuation risk and consolidate cash flow.
- Execute a cost benefit analysis for credit facility options.
- Create a construction to permanent financing strategy for the corporate office utilizing existing facilities to consolidate borrowing base.
- Perform a review of bank balances for the previous six to nine month period which showed that substantial balances were not being utilized efficiently or effectively;
- Create a strategy for long cash positions that were not invested and an infrastructure to offset short positions in one facility, with long positions in others.
- Execute a cost benefit analysis for enhanced treasury solutions.
Recommendations & Results
The combination of temporary construction financing leading to the consolidation of credit facilities proved to provide savings in overall interest expense, as well as easing cash management and creating more fluid cash flow. Consolidating cash flow through treasury services provided better utilization of cash and improved the company’s debt service ratios. Additional treasury services were identified through the process which created additional efficiencies and provided more availability of accounting staff hours for higher and better use.
Completion of the corporate facility resulted in consolidation of departments and facilitated operating efficiencies beyond the company’s expectations. The bank is currently evaluating a credit facility to provide for expansion to the corporate office to support the company’s continued growth and success.