Surety Bond Negotiations in Heavy Infrastructure LOI

by a searcher from Keller Graduate School of Management of DeVry University

2 months ago

I am reaching out for some insight on a surety bonding issue.  I am working on finalizing an LOI with a seller of a large heavy infrastructure company and the seller is concerned about the surety  bonds that are currently in place.  The company is able to bid much larger projects because he has increased the company's bonding ability, however, the seller is personally responsible for some of the collateral on the surety bond.  Additionally the seller is concerned that the increase in debt load could affect the surety and also the future growth of the company.  The seller rolling 40% equity.

Has anyone dealt with surety bonds on deals?  If so, how was the deal the structured to accommodate the surety company in the LOI? Any recommendations for bonding companies that would be willing to take a look at the deal?  Thanks so much for your help!

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22 comments

professional from Florida State University - College of Business

Hey Jodi- Your best bet to keep the current surety program in place is to have the seller continue to personally guaranty. And at 40% equity this could even be a requirement of the surety. The bigger hurdle will be the debt load, as you mention. Depending on what the deal structure looks like and what impacts to ratios it can be very problematic. There are a few creative workarounds (Seller financing, collateral, etc..) to alleviate potential problems. Ultimately it'll come down to the health and makeup of the Balance Sheet post-transaction. You'll definitely want to have these conversations before the transaction goes through. We're happy to help here. --@----.com

2 months ago | like reply | 0 likes

searcher from Massey University

Gallagher, Aon, Marsh, a few you can reach out and discuss.

2 months ago | like reply | 0 likes

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