GRAND RAPIDS — Alternative lender Liquid Finance LLC completed its first deal last month with financing for a Pennsylvania-based maker of farm equipment.
Business partners Bill Melvin Jr. and David Sassano expect Grand Rapids-based Liquid Finance to do many more deals in the near future, particularly given the level of economic distress brought on by the COVID-19 pandemic.
“With everything going on, there’s a lot of demand for our work,” Melvin told MiBiz. “We see that we’re going to be able to help companies through the challenging times and thrive when we get back to normalcy.”
Melvin, who serves as CEO of Grand Rapids-based Liquid Asset Partners LLC, partnered with Sassano this spring to co-found Liquid Finance, an asset-based finance company that structures financing for companies in distress. On some occasions, Liquid Finance will acquire a company’s assets under a lease-back arrangement.
That was the case in the deal for Biglerville, Pa.-based GVM Inc., a family-owned agricultural equipment maker of spreaders and sprayers that got overleveraged and sought Chapter 11 bankruptcy protection to restructure. GVM has operations in Pennsylvania, Ohio, Indiana, Missouri, Georgia, Washington, and California, and distributes its products in the U.S., Canada and Australia.
Liquid Finance acquired GVM’s assets and leases them back to the previous owner to continue operating the company. The transaction “allows them to clean up their balance sheet, lower costs, and get back on their feet to grow in the years ahead,” said Melvin, the CEO of Liquid Finance whose father, Bill Melvin Jr., started Liquid Asset Partners in 1974.
“The cool thing about it is we’re utilizing our skills as an appraisal and liquidation firm to help a company survive and exit bankruptcy,” he said.
For years, Melvin saw the potential to form a finance company that would complement the work of Liquid Asset Partners, which does appraisals, auctions and liquidations and works with banks, retailers, bankruptcy courts, trustees, manufacturers and lenders. The opportunity to proceed came when he met Sassano, a finance professional who in his career has worked with hedge funds, private equity funds and family offices, as well as raised capital for startup companies.
Liquid Finance started looking at deals about a year and a half ago and closed on the GVM transaction at the end of May.
“I started looking at (forming a finance company) about five years ago and started realizing that it was a good avenue for us to go into. We needed the right person to help lead that group,” Melvin said. “It definitely has the potential to grow and flourish. It is an add-on to our core competencies and core services we provide, which is evaluating companies and assets and figuring out what they’re worth and what’s the plan of action.”
Melvin found that leader in Sassano, who with his wife, Anne Sassano, moved from California to her native Grand Rapids three years ago. Anne Sassano also went to school with and is a good friend of Gwen Melvin, Bill Melvin’s wife.
After the introduction from their wives, Sassano and Melvin “started chatting,” Sassano said. Sassano saw in Liquid Asset Partners an opportunity “that made a lot of sense.” The company “in essence really, really has the magic and experience to evaluate (the) value” of a business that was in distress, he said.
“And that’s the hardest part. Knowing what the assets are worth and, if they have to be liquidated or sold in some manner, he has the whole infrastructure to actually sell it,” said Sassano, managing partner of Liquid Finance. “It just was a natural fit where I could bring investors and capital and structure expertise on the finance side to Bill’s expertise, which is asset valuation, liquidation and really the infrastructure to move the assets if there was a distressed situation.”
Liquid Finance focuses on asset-heavy sectors, including manufacturing, distribution and retail.
After doing some level of work on 10 or 11 potential deals, Liquid Finance found one of those “golden nuggets” in the 50-year-old GVM Inc., Sassano said. Liquid Finance could provide the financing GVM needed to restructure and continue to operate after emerging from bankruptcy.
Liquid Finance ended up acquiring GVM’s assets under a lease-back arrangement.
“It worked out real nice. They had a lot of assets and it’s a good company,” he said. “They just got into trouble. They borrowed too much money and overbuilt.”
Liquid Finance gets involved in companies “after banks say ‘no’” and require an alternative lender, Sassano said. The firm typically looks at deals in the $1 million to $50 million range.
Since Liquid Finance is “not cheap money,” borrowers are urged to refinance as soon as possible after returning to financial health, he said.
“We get them into health, typically 12 months to 24 months, and then they’re able to do that,” Sassano said. “We help them refinance with another lender somewhere else at a much cheaper rate.”
Backing for deals comes from private institutional capital that includes hedge funds, private equity firms and family offices “that understand the potential of distressed companies,” Sassano said. Liquid Finance will put its own capital into a deal as well, he added.
“Banks have an appetite for cash flows, but really investors and institutional funds that focus on distressed lending understand it,” Sassano said. “We can see and help companies that others would walk away from, and when we do that we have the ability to save companies, save jobs, and not allow companies to fall through the cracks.”
After closing the first deal in GVM, Melvin expects that Liquid Finance should evaluate plenty of opportunities over the next two years, given the economy and the effects of the pandemic. To that end, Liquid Finance Partners currently has a strong pipeline of potential financing transactions, he said.
Because of the economic distress caused by the pandemic, “we are seeing some more opportunities and we do expect probably in the next month or two to see a wave coming in,” Sassano said. “We’ll have a larger opportunity to evaluate.”
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