SOLU­TION

• Found­ed in the 1960s, Geico (the ​“Com­pa­ny”) has become a world leader in design and devel­op­ment of cus­tomiz­able turnkey auto­mat­ed auto­mo­tive pro­duc­tion line solu­tions offer­ing flex­i­ble and cre­ative ser­vices for any project type
• The Com­pa­ny was award­ed a $125 MM con­tract (the ​“Project”) with a world renown auto­mo­tive man­u­fac­tur­er (“OEM”). The Com­pa­ny would serve as the gen­er­al con­trac­tor and has reduced its per­for­mance risk by sub-con­tract­ing the project to a For­tune 500 com­pa­ny as well as a lead­ing provider of assem­bly line appli­ca­tion technology
• In order to begin the Project, the OEM request­ed a siz­able down pay­ment from the Com­pa­ny. How­ev­er, the OEM required a guar­an­tee of con­tract com­ple­tion pri­or to mak­ing the down payment
• This posed a prob­lem for the Com­pa­ny as it was oper­at­ing with­in under a mora­to­ri­um due to over-lever­age (close to 10x) and razor-thin equi­ty val­ue and thus did not have its nor­mal bond­ing lines avail­able with its exist­ing bank-syn­di­cate (10+ banks)
• Chi­ron Finan­cial was retained as the invest­ment bank to assist in obtain­ing an instru­ment and struc­ture that would sat­is­fy the Project guar­an­tee require­ments by the EPC Customer

OUT­COME

• Chi­ron suc­cess­ful­ly arranged a $67.5 MM advance pay­ment sure­ty bond through a strate­gic part­ner which was to be used as the Project guar­an­tee; how­ev­er, the OEM was unfa­mil­iar with the sure­ty bond and instead required the more com­mer­cial, advance bank guar­an­tee – which was impos­si­ble for the Com­pa­ny to obtain due to the con­straints of its mora­to­ri­um agreement
• Chi­ron mar­ket­ed the sure­ty bond as col­lat­er­al to secure the advance bank guar­an­tee to mul­ti­ple local banks, but all were unfa­mil­iar with the pro­posed struc­ture and declined the opportunity
• As a result, Chi­ron mar­ket­ed the oppor­tu­ni­ty to many inter­na­tion­al cap­i­tal providers, received mul­ti­ple advance bank guar­an­tee term sheets struc­tured as a fronting guar­an­tee back­stopped by a sure­ty bond, suc­cess­ful­ly nego­ti­at­ed to obtain the best terms for the Com­pa­ny, and assist­ed with the dili­gence process
• The OEM at this point incurred bud­get over­runs and con­se­quent­ly paused the project until 2025