IFC Funds $14 Million Equipment Lease for New Tissue Mill

After 4 months of collaboration, IFC has funded a lease for $14 million to a tissue manufacturer for limited-production, key piece of equipment.
The tissue plant, which has yet to produce a single parent roll, will begin operating in January after installation is finished on a 3-story-tall machine that converts slurry, a sort of “paper soup”, into parent tissue rolls. The machine, which takes almost 9 months to be manufactured, produces an eight-and-a-half foot wide band of tissue at a mile per minute.
For the tissue manufacturer, finding a partner to lease this formidable machine was no easy task. The machine is a significant capital investment, and with an order-to-delivery time taking the better part of a year, advance progress payments were a must. Adding complication, the manufacturer of the equipment is in another country. Also, as the tissue plant was not yet in operation, there were no revenue figures for creditors to evaluate.
Credit was also a factor. The owners of the company would not issue letters of credit. “No letters, period” said Frank Striplin, Senior Vice President of IFC. “The structuring of the deal, and providing for that need, was important for the company.”
Structuring a lease on such a unique piece of equipment, while still meeting the company’s needs, was a challenge. The company researched several options, but ultimately chose IFC.
“Other lenders could not match the structure and rate package that IFC was able to provide,” said Striplin. “Some lenders could offer the structure, but not the rate, or the rate, but not the structure. It was a difficult deal to get done, but IFC has considerable experience with challenging structured transactions.”
Another factor in choosing IFC was the owners’ previous experience with the company. Earlier, IFC had provided a $1.3 million lease for a wetlap production line for the company’s pulp mill.
“They were pleased with our previous transaction and were comfortable that we could perform again,” said Striplin.

IFC did, providing the company with a fixed-rate, 6 year lease, allowing for the equipment to be easily budgeted and without the risk of fluctuations in interest. IFC is making progress payments to the overseas manufacturer while the equipment is being manufactured, transported and installed, and was able to negotiate for the manufacturer to provide a subordinated note on the equipment to help with installation costs. In addition, IFC received a surety bond, a three-party instrument between a surety, the manufacturer and the tissue company, to guarantee that the equipment would be manufactured and installed to operating specifications. In alignment with the company’s needs, IFC structured this transaction requiring no letters of credit from the owners of the tissue mill.
Currently, the 30 shipping containers which hold the equipment have arrived and are undergoing the assembly and installation process at the plant. Assembly will take 3 months total, and the machine is being constructed in a building specifically built for it. One specific component of the machine, the Yankee drum, is so large that there are only a few foundries in the world which can produce it.
When operational, the machine will allow the plant to produce 100 tons of tissue per day. These parent rolls of tissue are then sold to other manufacturers, who convert the parent rolls into a wide variety of products, such as facial tissue, napkins, paper towels, and toilet tissue. The tissue company expects the new tissue produced to add over $23 million in annual revenues.
“No matter how large or small, we are here to address all of our customers’ equipment needs,” said Striplin.
IFC excels at completing structured transactions. For more information about IFC’s large ticket capabilities, contact Frank Striplin, Senior Vice President of IFC, at 888-554-4432 ext. 1900.