Powerpack: subordinated loan for the purchase of business premises
We believed that the owner's plans should not fail for lack of funds.
Tim Lievens, senior investment manager at PMV
Taking over a commercial property usually requires a substantial investment. Finding sufficient financing can be a daunting task. The owner of rubbish bag manufacturer Powerpack succeeded by combining different forms of financing. He supplemented a bank loan with a subordinated loan from PMV and a vendor loan from the owner.
Powerpack (Beerse) is Belgium’s leading manufacturer and supplier of refuse sacks and industrial films, about 6,000 tonnes a year. Its customers are mainly municipalities, cities and intermunicipalities. The company is strongly committed to biodegradable bags. “It has, after its own research, found a formula where those bags remain sturdy long enough and are still compostable,” knows Tim Lievens, senior investment manager at PMV. After losses in 2014 and 2015, Powerpack was acquired in 2016 by Willem van den Berghe, who introduced a new business model with a focus on sustainability and innovation. Thanks to a reduced cost structure, new improved products and production optimisation, he managed to achieve solid growth and positive profitability again with the company.
Vendor loan
All along, Powerpack was renting the current business site. For this, it was paying more than what the interest charges would be on the financing to buy the building and land. In order to get rid of the rent and buy the building (with the land), the owner therefore sought financing. BNP Paribas Fortis then provided a loan. “However, the bank demanded that the buyer’s own contribution be greater, but the buyer did not have the means to do so. With a subordinated loan from PMV, the bank’s demand could be met. Moreover, the owner was willing to grant a vendor loan. This is a popular form of payment deferral in which the buyer pays part of the acquisition price over time, in the form of a loan. The combination of the financing forms enabled the owner to acquire the property,” Tim Lievens explains.
Repayment capacity
Can a subordinated loan be repaid? It is the key question when granting it. Before reaching an agreement, PMV therefore carefully examines the repayment capacity. “Powerpack seemed ready for us to produce and commercialise compostable bags, a growing market segment. In addition, Powerpack appeared to have several long-term contracts (with off-take obligations) which assured sales for a piece. Finally, we also believed that Powerpack’s knowledge and experience would enable the company to further exploit foreign markets. To this end, Powerpack built a completely new production facility in Kosovo. We therefore believed that the owner’s plans should not founder on a lack of financial resources and decided to grant a subordinated loan,” concludes Tim Lievens.
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