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R&B Machine

Sponsor: BrightWater Partners

Type of QALICB: Operating Company

Owner: BrightWater Holdings

Cty and State: Upland, CA and Hunstville, AL

Contact Person: David Sosa

Phone: 773.255.6709

Contact Email: [email protected]

Allocation Amount Requested: $10,000,000

Brief Description of Development:

R&B Machine is a high precision manufacturer of complex metal component parts for Aerospace, Space, and high end  industrial applications. The company has been in operation for over 18 years and is a leading provider of complex component parts and engineering services. The company currently operates out of two locations: Upland, CA (Metro Highly Distressed) and Ardmore, AL(Metro Highly Distressed)

R&B Machine is seeking $10 million in federal new markets tax credit allocation and if available $10 million in State of California for the following:

1) Purchase of additional equipment for its Upland, California facility ($4 million)
2) Working Capital $1,100,000

The new equipment will allow the company to meet the growing demand for larger sized, high precision component parts for space (launch equipment for NASA) and aerospace (Unmanned aerial vehicles, etc.). This investment is expected to create at least 60 new jobs with average wages of $18/hour, full health care benefits (health, vision, dental) and 401k benefits.

If the state of California does not adopt a new markets tax credit program than R&B machine would like to execute a $10MM federal only financing program as follows:

1) Purchase additional manufacturing equipment for its Huntsville, Alabama facility - $1.5 million; and 
2) Purchase  equipment for its Upland, California facility - $0.5 million

The new equipment will be used to target the same end markets (space and UAV) however, it will be focused on supplying primarily the significant demand for these services on the eastern half of the United States. The combined Alabama and California NMTC financing is expected to create 40 new jobs (30 in AL and 10 California)

But-For Statement:

Without the support of a new market tax credit, capturing the substantial growth available in California and  launching the new Alabama facility would not have been feasible until 2018 and likely not possible even at that time.  Without the availability of new markets capital, R&B would not be able to support an investment of this size for the following reasons:
 
- In order to adequately fund the growth opportunities in both locations, the minimum investment in equipment and working capital would be approximately $5.8 -  $7.3 million
 
- R&B s current cash flow of approximately $1 million and total current non NMTC debt of $3.0MM can not support any additional debt vs. the actual unmet cash need of up to $7.3 million
 
- Lenders for companies of R&B s size generally do not lend more than 2-3x cash flow. Initial debt/cash flow to fund the R&B east facility would be over 5x which is well above all conventional lending standards
 
- Raising up to $7.3 million of equity to facilitate the growth of both locations would also not be feasible as it would result in substantial, unacceptable dilution to the current ownership group 
Underinvesting in California would mean the loss of incremental growth opportunities and the loss of job creation in that location. This would in turn make the feasibility of further investment in Alabama delayed or unlikely  
 
-Undercapitalizing the new Alabama facility would mean that current unmet demand will be filled by alternative suppliers, likely outside of Alabama

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