Creative Financing Solution to Unlock Shareholder Value
Atlanta, GA — A publicly listed specialty industrial services company with a complicated legacy capital structure worked with Configure Partners to secure a simpler and lower-cost financing solution, which extended maturities and created a clearer investment thesis for the public equity markets.
The Major Insight
Despite the company’s lack of more traditional sponsor backing, Configure structured and implemented a global debt recapitalization and secured a highly competitive lending commitment from a marquee private credit lender.
Setting the Scene
TEAM, Inc. (NYSE: TISI) is a publicly traded leading provider of specialty industrial services, offering clients access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services. The company serves the aerospace, manufacturing, mining, pipeline, power, pulp and paper, refining, petrochemical, and chemical industries.
From 2020 through 2022, the company experienced significant operational issues and earnings shortfalls, prompting its existing credit investors to provide additional lending support and take an equity position.
The State of Affairs
The capital markets considered TEAM a lender-owned company to a significant degree, given its complicated capitalization consisting of multiple debt issues with overlapping liens, all put in place during a period of financial distress. During this time, TEAM required various forms of financial support to fund its liquidity needs, which were largely supplied by one lender. With the benefit of the supportive lender, the company has improved operational performance, but the complex capital structure made it difficult for investors to grasp and understand the compelling story behind TEAM, in addition to being expensive and containing near-term maturities.
The Main Objective
The Configure team has a passion for and a deep history of telling unique company stories to the market. Our goal was to secure and structure a financing solution that would simplify the capital structure and better align with the company’s significant operational turnaround and improved outlook.
Bringing It to Life
Configure worked closely with management and the principal lender to undertake a tailored marketing process, ultimately transacting with HPS Investment Partners, a marquee, blue-chip name in private credit recently acquired by BlackRock. HPS was able to offer very attractive financing and make the capital structure much more efficient. The new facility was announced on March 13th. In the two weeks after announcing the transaction, the stock price rose by almost 30%.
Transaction Highlights
The first-lien term loan facility provided by HPS consists of a $175.0 million funded term loan and a $50.0 million delayed draw term loan, which are available to the company subject to certain conditions. Used to repay various existing secured credit facilities, the first lien facility bears interest at the SOFR, plus an interest rate spread of between 6.0% and 7.0%. The financing delivers more than a 100-basis point improvement in the company’s blended interest rate.
In conjunction with the transaction, the company also rolled over substantially all of the remaining outstanding debt under the existing senior secured term loan into a new $97.4 million second lien term loan provided by Corre Partners. As part of the transaction, the company’s existing ABL credit facility provided by Eclipse Business Capital continues and was amended to permit the consummation of the transaction.
The End Results
Thanks to a collaborative, creative approach, Configure secured a simplified capital structure that enhances the company’s financial flexibility with blue-chip private credit partners. With long-term financing in place, TEAM will be able to focus on its continued margin enhancement and revenue growth.
“The tangible improvements in TEAM’s operating performance and cash flow generation over the past two years were key to completing this refinancing, which lowers our cost of capital and significantly improves our financial flexibility by extending our term loan maturities to 2030,” said Keith D. Tucker, TEAM’s Chief Executive Officer. “We are now better positioned to execute on our ongoing initiatives to drive topline growth, lower our cost structure, and improve our cash flow, creating long-term value for our shareholders.”
The Configure Approach
Configure specializes in debt placement, special situations, and M&A advisory, providing superior client service and execution to private equity sponsors in acquisition finance, refinancing, and dividend recapitalization transactions. The firm’s credit resolution and special situations practice is the trusted advisor for stakeholders confronting capital structure challenges.
About Rory Keenan
Rory has over twenty years of investment banking and credit advisory experience in the middle market.
Prior to joining Configure, Rory held senior positions at Jefferies, Solomon Partners, UBS and Raymond James. Over the course of his career, Rory has advised management teams, directors, creditors, buyers and other stakeholders of highly levered companies in need of creative financing solutions. He has executed advisory transactions including private and public debt and equity financings, exchanges, mergers and restructurings. Rory has extensive in-court and out-of-court restructuring experience.
Rory received a BA from the College of The Holy Cross and is a FINRA General Securities Registered Representative (Series 7, 63).