“Where will the money come from?”
I wanted them to know that we were attentive to their covenants and were exhausting all possibilities.
It was Q3 of 1997 and I was the new President & Chair of our family-owned chain of supermarkets. We had just bought out a founding family member in part with a large, bank-financed down payment and term payout. Cash was thin. Super Walmarts were about to open in all three of our geographic markets. And 520 employees were looking to me for direction and security in the face of their new and more competitive environment. My sibling shareholders were neither patient nor supportive as they tried to maintain brave faces in their new and inexperienced positions as directors in a complex and capital intensive business. Earnings were okay, but not as robust as they needed to be to comply with the bank’s covenants. There was no way we could compete with the SuperWalmarts unless we found cash—now–for repairs, updates and expansion.
My job was to explore every alternative and develop a capital plan that would both document our strategy and signal to the banks that we were not just relying on their faith in us as operators. I wanted them to know that we were attentive to their covenants and were exhausting all possibilities. Other than an equity raise, I evaluated and squeezed capital out of every option I could find. Ultimately, we made it all work, never thinking that our capital plan would evolve into a model that has since worked for other companies and as an educational tool for CEOs. In the years since, working with CEOs in a round table setting where they explore capital options with one another, my learning has reached a whole new level—and Capital Access Forum has become a platform for insightful and beneficial dialogue. It begins with a key strategic and pragmatic question that CEOs, boards and banks must ask, or should ask, on a routine basis: “Where will the money/capital come from?”