Company Name: Rainbow Tree Company
Financing Amount and Type: $16 million ESOP transaction term loan, $5 million line of credit and $3 million equipment finance line
Rainbow Tree Company became a 100% employee-owned business in early 2021. The company serves a wide array of residential, commercial and municipal clients within the green industry, across the United States and Australia, through its development and delivery of science-based products and service protocols supporting the preservation and enhancement of the health of trees, shrubs and turf in the urban landscape.
Need
Rainbow Tree Company wanted to transition from a 10% employee-owned company to a 100% employee-owned company. An employee stock ownership plan (ESOP) is an employee benefit structure that gives workers ownership equity in the company through shares of stock. These plans have unique financial, legal and regulatory requirements. The company was also looking to formalize its banking relationship with a single partner that could support lines of credit and other financial solutions.
“We had an existing banking relationship but when it came to term sheet time, they really failed to show up for us," explains Mark Peters, CFO of Rainbow Tree Company. “That's when we made the decision to start exploring other options." Rainbow Tree Company engaged a team of outside experts to help guide them through the search for a banking partner that could support an ESOP and their future expansion plans.
Solution
Rainbow Tree's accounting firm recommended an introduction with PNC. PNC was able to demonstrate that it had the internal specialization to understand Rainbow Tree Company's ESOP. The Rainbow Tree team met with PNC's Chemicals and Plastics Group, which provided valuable advice on the business. PNC also crafted an ESOP solution and line of credit for Rainbow Tree with favorable terms.
Results
PNC's initial efforts to deeply understand Rainbow Tree's ESOP business model and provide advice created significant value for the team at Rainbow Tree Company.
“What helped us make the decision was how prepared PNC was during our initial meetings," explains Peters. “They had a dedicated chemicals group that understood the R&D/product development processes that are key to our business. They also had a dedicated ESOP team. We came out of those meetings feeling like we could work with them and that they answered our questions."
PNC's team crafted an ESOP term sheet that included a $16 million ESOP transaction term loan, a $5 million line of credit, and a $3 million per year equipment finance line of credit for future purchases. The relationship manager and ESOP team were also able to explain to PNC's credit team and Rainbow Tree Company how to analyze financials throughout the transition — ensuring that terms were aligned during the process. Rainbow Tree Company has now transferred its entire banking relationship to PNC. PNC has also taken on an advisory role as Rainbow Tree continues to grow its business.
Ongoing discussions have also meant that Rainbow Tree Company is now considering enrolling its employees in PNC's Organizational Financial Wellness Program, which provides financial education, savings and other benefits.
“We are focused on doing the most that we can for our employees," says Peters. “Throughout our relationship with PNC, they have provided valuable advice about how to improve our offerings to employees in the realm of personal financial management best practices."
With PNC, Rainbow Tree Company has been able to:
- Get a $16 million ESOP transaction term loan, $5 million line of credit and $3 million equipment finance line
- Continue with their strategic business expansion plans
- Transition and improve treasury management to a single provider, enhancing internal controls and streamlining operations
- Enhance their existing financial wellness program for employees
Throughout our relationship with PNC, they have provided valuable advice about how to improve our offerings to employees in the realm of personal financial management best practices.
