NEW YORK — Allied Alloys LP has landed a $20-million revolving credit facility from Encina Business Credit LLC, representing the newly formed lender’s first financing deal.
“Because of the type of (credit) structure we put together working with Encina, (which) just entered the market, we have access to more working capital,” Ron Cayon, chief financial officer of recycler Allied Alloys, told AMM, adding that “the facility improves our ability to buy and sell inventory.”
“Certainly we are looking at the metals sector (for financing opportunities), considering that banks have a distaste for the space,” Encina chief credit officer Thomas Sullivan told AMM.
The credit facility consists of a working capital revolver secured primarily by accounts receivable and inventory, the proceeds of which will go toward refinancing Houston-based Allied Alloys’ existing debt and increasing the working capital of the business, Chicago-based Encina said June 23.
Launched in March, Encina is an asset-based lending platform providing revolving credit lines of $5 million to $50 million secured by accounts receivable, inventory, machinery, equipment and real estate. The product is aimed at North American middle-market borrowers who find it difficult to obtain financing through traditional means.
“Encina is a non-bank asset-based lender. … As we are not bound by the same regulatory guidelines faced by banks, we have the ability to provide more flexibility to borrowers. Generally, this means we can focus more on things like the quality and value of a company’s underlying assets and the strength of management, and less on restrictive financial covenants,” Sullivan said.
Encina’s clients also aren’t required to move their cash management or existing non-credit-related banking relationships.
“Despite being relatively new, the people at (Encina) have a deep knowledge of the industry, which has been very helpful,” Cayon noted. In fact, Sullivan served as chief risk officer of General Electric Capital Corp.’s corporate finance segment for the past 15 years, focusing on metals and mining.
Encina’s clients could use the loan proceeds to fund working capital, acquisitions, refinancings, growth, restructurings, debtor-in-possession or exit financings, and other special situations. Positive cash flow is not a requirement, Encina said.
“We like current assets. … Financing current assets is our specialty and something we, in our careers, have done for decades,” Sullivan said.
Allied Alloys intends to employ the proceeds in its day-to-day business. “There are always strategic opportunities out there. We remain cautious (of strategic opportunities), but we want to keep focused on our core business,” Cayon said.
The recycler specializes in stainless steels, nickel-based alloys and other high-temperature scrap metal, which it supplies to stainless steel mills worldwide.