Capital Formation

Oil Field Services Company Secures Growth Capital

Challenge:

Owners of oil-field services company (3-D seismic) sought to aggressively grow the company from ~$16mm in revenue and ~$4mm in EBITDA in a volatile and competitive market.  Necessary equipment to scale was valued at double the balance sheet of the company.

Solution:

A two-company approach was developed, raising funds for both to accomplish growth strategy:

  • Created Company 2 for holding large asset as collateral
  • Sought, found, and closed $500,000 equity, $7mm senior debt, and $5mm subordinated debt, all from single investor to acquire $12mm of necessary equipment
  • Created structure to lease equipment back to Company 1
  • Same investor provided growth injection into Company 1 of $1mm equity and $1mm senior debt to accelerate growth into new markets

Result:

Company 1 doubled revenue in the following 36 months and increased EBITDA ~350%.  Debt of both companies was retired and equipment purchased back into operating company for depreciation purposes.  Investor realized 20+% IRR and retains 25% equity of organization while founder and management team were able to take distributions in excess of $2mm collectively.

Back to list