A faith based non-profit organization found itself at a critical impasse when its lender would not renew a letter of credit backing a bond indenture unless the organization immediately paid down its tax-free public bond to achieve an 80% loan-to-value ratio, without the use of its endowment fund. The organization had experienced multiple years of decreased funding from state agencies while private fund raising had declined significantly due to due to the second great depression from 2008 through 2012, and had significant exposure on an interest rate SWAP. Cash flow short falls, operational and capital projects, had been continually funded through its endowment fund. Real estate was the primary collateral backing the bond had experienced a significant decline in value during the second great depression, and the organization was in the middle of a significant capital improvement project. Lastly, very few lenders were in a position to finance the tax-free credit facility, and even fewer were interested in refinancing the interest rate SWAP.

DT Advisors determined that the organization had sufficient collateral to refinance the credit facility when considering all of the organization’s assets; however, did not have the ability to cash flow its operations and debt service requirements in the current and subsequent year. A plan was developed to improve the organization’s cash flow in the upcoming 18- months so the organization generated a cash surplus through cost reductions, deferrals on the capital improvement plan, and capturing incremental revenue opportunities. Subsequent to developing the restructuring plan, DT Advisors worked with the Board of Directors to develop a five year plan to restore the endowment fund and de-lever the organization. The incumbent lender agreed to extend the credit facility based on these improvement plans in order to transition out of the bank.

A new credit facility was signed within 12 months with a new lender which refinanced the existing bond offering with a fixed rate tax-free direct purchase bond, termed out the unfavorable interest rate SWAP, and provided a line of credit to fulfill short term borrowing needs. Meanwhile, the organization continued on its mission by providing services to its students and no jobs were eliminated in the process.