News - Altria Corpo

In a previous post we presented the sale and lease back as an operation that provides liquidity to the company. In this article we will assess its undoubted advantages and also some of the disadvantages it may have.

Advantages of sale and leaseback

Let us remember that the company that carries out a sale and lease back with a property it owns obtains several advantages:

– It obtains immediate liquidity derived from the fact that it receives the price of the sale of the property. This liquidity can be used to reduce existing debt or to undertake new investments.

– You can continue to occupy the property, no longer as the owner but as a tenant, so you can continue your business without having to move.

– You will have the option to repossess the property if you exercise the purchase option.

– There can be a balance sheet improvement as a fixed asset is converted into cash, which can be beneficial to the perceived financial health of the business.

Disadvantages of sale and leaseback

In addition to these advantages, there are also some disadvantages to be considered in this type of transaction:

– Long-term cost: although sale and leaseback provides immediate liquidity, it usually entails a higher long-term cost than maintaining ownership and financing the asset through other means.

– Loss of ownership and inability to benefit from future appreciation of the asset.

– The lease resulting from sale and leaseback ties the company to a long-term contract, which may limit its operational and financial flexibility. If the company’s needs change, it may find itself tied to an asset that no longer fits its operations or strategies.

– The sale and leaseback process can incur significant transaction costs, including legal fees, valuation fees and other administrative expenses. These costs should be considered when calculating the net benefit of the transaction.

 

In the third and final article on sale and leaseback, we will discuss the details and operation of sale and leaseback transactions.

The results of the Barometer developed by Altria Corpo and the IEF reveal a tightening in the credit market for companies and an increasing search for fintech solutions and alternative financing. 

 

On February 7th, the results of the 4th edition of the Business Barometer of Fintech and Alternative Financing, conducted by Altria Corpo in collaboration with the prestigious Institute of Financial Studies (IEF), were published. This Barometer periodically collects the opinions, personal experience, and expectations of companies and providers of business financing (both banking and alternative) regarding credit granting policies, and especially the knowledge and use of fintech and alternative financing by companies.

In this 4th edition, whose surveys were conducted between October and December 2023, there is a notable increase in the difficulty of accessing bank credit. Up to 52% of companies believe that access to bank financing was difficult or very difficult, compared to 44% the previous year. Pessimism also continues regarding the possibility of banks mobilizing credit for 2024. 42% of companies believe that no bank will mobilize, and the banks themselves do not foresee an increase in lending: 30% believe that no bank will mobilize credit, and 70% believe that only some banks will do so.

The degree of knowledge about alternative financing among companies is consolidated around 80%, and 48% of companies have used some form of non-banking financing solution, with factoring and leasing being the most used instruments. As for fintech, a subgroup of alternative financing characterized by the use of technology and online platforms, the degree of knowledge among companies is around 50% and its use, however, is reduced to 22%, with invoice advance being the most used fintech product.

The outlook for 2024 is somewhat gloomy for companies. Banks and alternative financiers foresee continuing to raise interest rates and further tightening credit granting policies. Faced with this, the percentage of companies that need to seek financing during this year exceeds 75%, and up to 54% of companies claim they will seek alternative financing sources to cover this shortage of bank credit.

You can see the main results of the Barometer in the link:Resultados Barómetro Financiación Otoño2023

Click here to access the video presentation of the Barometer.

 

 

 

At times, companies require liquidity to tackle new investments or to restructure a liability with an excess of short-term debt. These companies often fail to secure this additional financing from their usual financial institutions, which would help them resolve these complex but non-critical financial situations.

When a company in this situation owns a property where it conducts its business, one possible solution is sale and lease back. This type of transaction, also known as lease-back or retroleasing, involves selling a property to an investor followed by a long-term lease of the same property, usually through a rental contract of between 10 and 20 years.

At Altria Corpo, we have helped some clients obtain liquidity through this method. In recent months, we have various examples of clients for whom we have secured several sale and lease back transactions. Let’s look at some recent successful cases to understand how it works and how it has helped the company overcome this difficult time.

 

A company from the Community of Madrid in the industrial sector, with 30 years of history, faced bank loans that represented an excessively high debt service. Despite increased sales and the quality of its clients, the banks did not offer additional financing or allow for extended terms. Altria advised them by structuring a sale and lease back operation using one of their industrial warehouses, which was owned and had a small outstanding mortgage. Altria found a buyer, an alternative financing company that acted as an investor, purchasing the industrial warehouse for 1.75 million euros and leasing it back to the same company for a renewable term of 10 years, with a purchase option after 10 years. Thus, the company did not have to vacate the sold property and retained the right to continue using the space through this rental contract. This provided them with immediate liquidity resulting from the sale.

On other occasions, sale and lease back provides liquidity for the expansion of the business itself. This was the case for a Catalan company, also in the industrial sector like the previous one, which wanted to serve new clients demanding higher production. The working capital and some fixed asset investment needed to undertake this project could not be financed by their institutions, as their level of indebtedness was already too high for them. In this case, the best option was also a sale and lease back on their main industrial warehouse, and the operation generated liquidity of 3 million euros for the procurement of raw materials, increased working capital, and enhanced production capacity, with which they can grow in sales and profits in the coming years.

Therefore, sale and lease back should be seen as a financing operation that, in certain circumstances, is the best option for the company.

In the following post, we will delve more into how sale and lease back transactions are structured.

Antonio Llera, who comes from Deloitte, joins the Barcelona team to deal with higher value-added operations, and Javier Galindo and Ignacio Martín expand the Madrid team, doubling its current capacity.

2024 marks the tenth anniversary of Altria Corpo and the year begins with important additions in the Corporate Finance Area that will further boost the business, level of service and advice for medium and large companies.

In Barcelona we are very proud to have Antonio Llera, a professional with extensive experience in corporate debt advisory and restructuring. In recent years he has held the position of senior manager in the Debt Advisory and Restructuring division of two of the most renowned financial consultancies for large companies, KPMG and Deloitte. Previously, he was at Banco Santander, where he held various positions in its Corporate and Investment Banking division, as well as in Structured Finance Risk. Antonio holds a degree in Business Administration and Management from the Universidad Pontificia de Comillas (ICADE) and several postgraduate degrees in finance from the IEB and Eada Business School.

Meanwhile, in Madrid, an office we opened in the summer of 2022 with two consultants, we have decided to increase our service capacity with two new professionals, taking into account the enormous potential of the business market in the Madrid region and the greater reach it gives us for the business fabric of the rest of Spain. Javier Galindo and Ignacio Martín have joined us to add value to their experience in business financing.

Javier Galindo is a professional expert in corporate finance with special emphasis on financing solutions for capital goods and other productive assets. He has spent most of his career in the Spanish branch of the renowned German financial group AKF Bank. Previously, he worked at CESCE, Agco Finance and ALD Automotive (Société Générale Group). Javier holds a degree in Economics from the Complutense University of Madrid and a Master in Financial Management from ESIC, complemented with training in auditing, insurance and foreign trade.

 

Ignacio (Nacho) Martín has more than 30 years of professional experience in different sectors, always related to the financial and business world. For 14 years he worked in the banking sector as a Business Manager and Director of Business Offices in leading financial institutions. He has managed different companies, and in recent years he has broadened his experience with the management of commercial teams in the insurance sector for companies. Nacho has a law degree from the Complutense University of Madrid, complemented by courses in finance and business management at the Polytechnic University of Valencia and the Carlos III University of Madrid.

We welcome these new additions and wish them every success at Altria Corpo.

Altria Corpo is a financial consultancy for medium and large companies, founded in 2014 by Albert Gumà and based in Barcelona. Its main services are advice on debt and equity financing, and access to more than 200 financial providers including banks, alternative financing, debt funds and other instruments. In its 10 years of existence, Altria Corpo has positioned itself as a benchmark in the search for financing for medium and large companies, with an accumulated amount advised of more than 450 million and more than 800 operations. The scope of the companies advised covers the whole of Spain, with a concentration in Madrid and Catalonia, which account for 80% of the total amount advised.