Highview Industries Ltd: What do you do with this request?

// DRILLS / ISSUE 04 / HIGHVIEW

IN HIGHBANK ISSUE 04 · 2026-07-30 · 5 MIN READTHE SENIOR READ — MICHAEL

Highview Industries

THE OTHER WORKING CAPITAL REQUEST

MANUFACTURING · WORKING CAPITAL · DIFFICULTY 2/5

// FACILITY REQUEST

ExistingUS$2.5m revolver

RequestedUS$4.0m revolver

IncreaseUS$1.5m

TenorAnnual review, rolling

Decision byTwo weeks — no drama

You have ten minutes. What do you do?

Read the file

// ONE FILE, THREE CHAIRS

// THE LENDING CHAIR · ISSUE 04

Highview Industries

You are here

// THE MD'S CHAIR

The Clean Yes

Read from this chair →

// THE CUSTOMER'S CHAIR

Your Supplier's Revolver

Read from this chair →

// THE SETUP

Highview Industries is an 11-year-old precision sheet-metal and engineered-components manufacturer in Hamilton. Revenue has grown from US$28m to US$38m over two years, driven by two three-year supply agreements — one with a dairy-equipment OEM, one with a healthcare fit-out group — both with CPI-linked pricing. The capacity expansion behind that growth was funded last year with a separate term loan, drawn and amortising on schedule.

The MD is asking for a US$1.5m increase to the working capital revolver, from US$2.5m to US$4.0m, to fund the receivables and inventory that the contracted volume carries. No deadline theatre: he'd like an answer inside two weeks because the second agreement steps up in volume next quarter.

If this request feels familiar, it should. Issue 01 was a manufacturer with strong top-line growth asking for exactly this increase. You know how that file read. Now read this one on its own numbers.

You have the financials. You have ten minutes. What do you do?

// FY25 SNAPSHOT

SOURCE: COMPANY-PREPARED · UNAUDITED · COMPOSITE CASE — FICTIONAL

REVENUE

US$38m

▲ +36% (2yr)

EBITDA MARGIN

12.4%

▲ +80 bps

OCF

US$2.1m

▲ growing with revenue

DSO

44 days

▲ +2 days

CONTRACTED FY26

78%

▲ 3-yr agreements

Read it against its own file first: debtor days 42 two years ago and 44 now, a wider margin, and operating cash flow positive in every year. Note the colour of the deltas above.

// THE FILE

THREE YEARS OF ACCOUNTS · US$000 · FY23–FY25

FY25 is the year just closed; FY26, the year the request is for, is 78% contracted. Figures in US$000. Operating cash flow is after interest and tax paid; debtor days are on revenue, stock and creditor days on cost of sales. A composite borrower: the accounts belong to no real company.

THE FACILITIES

Working capital revolverAnnual review, rolling. Drawn to within US$0.1m of the limit at the FY25 peak.: NOWUS$2.5m limit · US$2.1m drawn; REQUESTEDUS$4.0m limit
Term loan — capacity expansionUS$6.0m drawn in FY24 for the new line; US$0.5m a year, paid on schedule. The equipment loan before it was repaid in FY25.: NOWUS$5.5m outstanding; REQUESTEDUnchanged
Security and covenantsNo guarantees. Both covenants met with room in each of the three years.: NOWGeneral security agreement; total debt ÷ EBITDA ≤ 2.5×, interest cover ≥ 3.0×, tested on annual accounts; REQUESTEDUnchanged

PROFIT AND LOSS

Profit and loss, US$000, by year.
Line	FY23	FY24	FY25
Revenue	28,000	31,200	38,000
Cost of sales	(19,656)	(21,840)	(26,600)
Gross profit	8,344	9,360	11,400
Overheads	(5,096)	(5,710)	(6,688)
EBITDA	3,248	3,650	4,712
Depreciation	(720)	(900)	(1,250)
EBIT	2,528	2,750	3,462
Interest	(190)	(500)	(640)
Profit before tax	2,338	2,250	2,822
Tax	(655)	(630)	(790)
Net profit after tax	1,683	1,620	2,032

BALANCE SHEET AT YEAR-END

Balance sheet at each year-end, US$000.
Line	FY23	FY24	FY25
Cash	241	523	572
Receivables	3,222	3,676	4,581
Inventory	3,231	3,590	4,373
Current assets	6,694	7,789	9,526
Plant and equipment	5,380	11,080	10,930
Total assets	12,074	18,869	20,456
Trade payables	1,939	2,214	2,769
Revolver (drawn)	2,000	1,600	2,100
Term loan	600	6,300	5,500
Total liabilities	4,539	10,114	10,369
Shareholders' equity	7,535	8,755	10,087

CASH FLOW

Cash flow, US$000, by year.
Line	FY23	FY24	FY25
EBITDA	3,248	3,650	4,712
Increase in working capital	(962)	(538)	(1,133)
Interest paid	(190)	(500)	(640)
Tax paid	(655)	(630)	(790)
Operating cash flow	1,441	1,982	2,149
Capital expenditure	(900)	(6,600)	(1,100)
Dividends	(600)	(400)	(700)
Term loan drawn / (repaid)	(300)	5,700	(800)
Revolver drawn / (repaid)	400	(400)	500
Net change in cash	41	282	49

RATIOS FROM THE STATEMENTS ABOVE

Ratios computed from the three statements, by year.
Ratio	FY23	FY24	FY25
Revenue growth	—	11.4%	21.8%
EBITDA margin	11.6%	11.7%	12.4%
Operating cash flow ÷ EBITDA	44.4%	54.3%	45.6%
Debtor days (on revenue)	42	43	44
Stock days (on cost of sales)	60	60	60
Creditor days (on cost of sales)	36	37	38
Cash conversion cycle, days	66	66	66
Total debt ÷ EBITDA	0.8×	2.2×	1.6×

THE REST OF THE FILE · SECURITY · COVENANTS · CONDUCT · DEBTORS · BUDGET

As the file stood when the request arrived: FY25 accounts final, FY26 budget approved by the board. What a bank has on file beyond the accounts — enough to write a full credit paper on. A composite borrower: none of it belongs to a real company.

OWNERSHIP, PEOPLE, PREMISES

85% The managing director — Founded the business eleven years ago
15% The operations manager — Joined in the business's third year; the shares were issued later

Managing director.: Founder; a toolmaker by trade. Runs sales and the two big customer relationships himself.
Operations manager.: Runs the floor and the expansion line; the second shareholder.
Finance manager.: A chartered accountant who joined three years ago; produces monthly management accounts for the board.

Leased, not owned: the Hamilton factory belongs to the managing director's family trust and is let to the company at a rent set by an independent valuer, with a lease running five more years and two rights of renewal. The rent sits in overheads.

FACILITIES AND PRICING

Working capital revolver: Limit US$2.5m; US$2.1m drawn at the FY25 year-endFloating; 8.0% all-in on drawings through FY25; line fee 0.50% on the limit; renewal fee 0.25%Annual review, rolling
Term loan — the expansion line: US$6.0m drawn in FY24; US$5.5m at the FY25 year-endFixed 7.0% to maturityUS$0.5m a year in half-yearly instalments; final maturity February 2033, the balance then repaid in one amount
Equipment loan (older): Repaid in full during FY25
Foreign exchange line: Forward contracts up to US$0.5mDealing marginFor euro-priced machinery and parts

SECURITY

General security agreement: Over all present and after-acquired property of Highview Industries Ltd, first-ranking, registered when the relationship began in 2021.
The landlord's consent: The family trust has agreed in writing that the bank may enter the premises to take and remove plant — without it, security over plant in a leased building is hard to reach.
Valuation of the expansion line: Independent, at purchase in FY24: installed cost US$6.6m; forced-sale value US$3.1m.
Guarantees: None.

COVENANTS, TESTED ON THE AUDITED ACCOUNTS

Each covenant, its level, and the result in each of the three years.
Covenant	FY23	FY24	FY25
Total debt to EBITDA No more than 2.5×	0.8×	2.2×	1.6×
Interest cover (EBIT to interest) At least 3.0×	13.3×	5.5×	5.4×

Audited annual accounts within 120 days of year-end, with a certificate of the two covenants. FY25's arrived on day 94.
Nothing monthly or quarterly is required. The board receives monthly management accounts; the bank does not.
Every covenant met, every instalment paid on its date, since the relationship began in 2021.

THE REVOLVER, MONTH-END BY MONTH-END · LIMIT US$2.50m

M1US$2.05m
M2US$2.18m
M3US$2.29m
M4US$2.36m
M5US$2.42m
M6US$2.47m
M7US$2.44m
M8US$2.48m
M9US$2.45m
M10US$2.46m
M11US$2.38m
M12US$2.10m

No excess over the limit and no dishonoured payment in the year. The revolver ran within US$0.1m of its limit for six month-ends in a row as the new volume built.

DEBTORS AT THE FY25 YEAR-END

The debtors ledger by age, with each band's share of the total.
Within terms (up to 45 days)	US$3.66m	80%
46–60 days	US$0.69m	15%
61–90 days	US$0.18m	4%
Over 90 daysOne invoice, disputed by a fit-out subcontractor; not provided	US$0.05m	1%
Total, as in the balance sheet	US$4.58m

CUSTOMERS

Dairy-equipment manufacturerThree-year supply agreement, CPI-linked; its standard 45 days: 22%; 25%
Healthcare fit-out groupThree-year supply agreement, CPI-linked; 45 days: 17%; 19%
Three further supply agreementsFood-processing equipment, fire-protection equipment, specialist vehicle bodies; three-year, CPI-linked: 31%; 34%
About 140 other customersOrder by order; 30–45 days: 30%; 22%

MANAGEMENT'S BUDGET FOR THE YEAR AHEAD

Revenue: ACTUALUS$38.0m; BUDGETUS$43.0m
EBITDA margin: ACTUAL12.4%; BUDGET12.5%
EBITDA: ACTUALUS$4.71m; BUDGETUS$5.38m
Working capital added: ACTUALUS$1.13m; BUDGETUS$0.90m — the FY25 cycle on the extra sales
Operating cash flow: ACTUALUS$2.15m; BUDGETUS$2.85m
Capital spending: ACTUALUS$1.10m; BUDGETUS$1.60m — tooling for the step-up
Dividends: ACTUALUS$0.70m; BUDGETUS$0.90m
Term loan principal: ACTUALUS$0.80m; BUDGETUS$0.50m
Revolver at year-end: ACTUALUS$2.10m; BUDGETUS$2.25m, peaking near US$3.4m in the second quarter

LAST YEAR'S BUDGET, AGAINST WHAT ARRIVED

Last year's budget against the actual result, line by line.
Line	BUDGET	ACTUAL
Revenue	US$36.0m	US$38.0m
EBITDA	US$4.30m	US$4.71m
Capital spending	US$1.00m	US$1.10m
Debtor days	45	44

WHAT IS STILL NOT IN THE FILE

A real file would also hold these. A paper that says which of them it needs before approving, and why, is reading the file properly.

The two supply agreements themselves — volume commitments, termination rights, what happens at renewal.
A site visit: the expansion line running, the stock on the floor, how much of it is work in progress.
The credit standing of the two large customers.
The insurance schedule, and the bank's interest noted on it.
A monthly cash forecast for the step-up quarter, rather than a year-end budget.

DOWNLOAD THE FILE · XLSX

With the rest of the file above, this one is complete enough for a full credit paper. Write one, and the first three sent in are read free, the way the senior reads here are written — how the pilot works.

// YOUR JUDGMENT

What do you do with this request?

[A]Approve as requested[B]Approve with a borrowing base, monthly aged debtors, and a tightened covenant package[C]Approve half now, the balance on half-year numbers[D]Hold for deeper diligence on the two supply agreements

This drill needs JavaScript: the options above cannot be selected without it, and the senior banker's reading stays hidden. Turn JavaScript on and reload the page to take the drill.

// THE READING

Run the same read you ran in Issue 01, in the same order. Working capital lines are sized for the cash conversion cycle applied to the revenue base — so first ask what a US$38m components manufacturer needs. DSO of 44 days, inventory around 60, payables around 38: a cycle of roughly 66 days, which on US$38m of revenue is about US$6.9m of working capital, of which the incremental US$10m of revenue accounts for roughly US$1.8m. The MD is asking for US$1.5m. The request is not a round number reached for in a hallway — it is the arithmetic of the growth, asked for slightly under what the maths would justify. In Issue 01 the first diagnostic failed before the file was open. Here it passes before the file is open.

Now the file itself, and every needle points the other way from Pacific Premium. The cycle did not lengthen — DSO moved two days in two years. Margin expanded 80 basis points while revenue grew 36%, which means the volume was priced, not bought. Operating cash flow is positive and growing in line with revenue: the growth funds itself except for the working capital it mechanically carries, which is exactly what the revolver is for. And the two numbers that make the whole file legible: 78% of next year's revenue is under three-year agreements with CPI pass-through, and the capacity expansion is already funded by a separate, amortising term loan. This balance sheet is structured the way Issue 01's should have been. The business got bigger. The cycle stayed the same shape.

Which brings us to B — the reader's favourite, and the interesting mistake. A borrowing base, monthly aged debtors, a tightened covenant package: every element sounds like rigour, and after Issue 01 it feels like the lesson applied. But conditions are not free. They cost the borrower administrative weight every month, and they tell a clean client that the bank read his file with a template rather than with judgment. Intensity of structure is a scarce resource priced in relationship currency — spend it on files that earn it, or it stops meaning anything. C buys the bank nothing but six months of the client wondering why. D is diligence theatre: what the agreements mean for this request — three-year terms, CPI pass-through, 78% of next year contracted — is already in the file, and reading the documents themselves is work for the annual review, not a reason to hold a clean request.

The senior banker's read is A. Approve as requested, full and fast, with the annual review the only machinery — because the file earned exactly that. This is the half of the discipline nobody writes memos about: a clean yes, delivered quickly, is also a credit skill, and it is what buys the bank the right to be slow and demanding on the murky files. If your instinct after Issue 01 was "never approve as framed", you learned a posture, not a framework. The Three Diagnostics cut both ways. They exist to tell deterioration from growth — and when they say growth, the discipline is to believe them.

THE NUMBERS THE READING USED

RevenueP&L · FY23 → FY25: US$28.0m → US$38.0m; Up 36% in two years, on two supply agreements — the growth the request funds.
Debtor daysRATIOS: 42 → 44; The cycle did not lengthen: debtor days 42 to 44 in two years.
Cash conversion cycleRATIOS · FY25: 66 days; Debtor 44 + stock 60 − creditor 38. The request is sized against this, before the file is read.
Working capital the cycle carries — the reading's quick version66 ÷ 365 × FY25 REVENUE: US$6.87m; About US$6.9m, of which the extra US$10m of revenue carries 66 ÷ 365 × 10.0 = US$1.81m — against a request for US$1.5m.
The same, from the balance sheet — the strict versionBALANCE SHEET · receivables + inventory − payables: US$6.18m; Lower, because stock and creditor days sit on cost of sales; it rose US$1.67m over the two years — the same story, at the strict convention.
EBITDA marginRATIOS: 11.6% → 12.4%; Eighty basis points wider while revenue grew 36%: the volume was priced, not bought.
Operating cash flowCASH FLOW: US$1.4m → US$2.0m → US$2.1m; Positive and growing with revenue. The growth funds itself except for the working capital it carries — which is what the revolver is for.
Term loanFACILITIES · BALANCE SHEET: US$5.5m, amortising; The plant behind the growth is already paid for separately. The revolver is not being asked to fund machinery.

Every figure above is in the file appendix before the question — open THE FILE and redo it.

The same request is never the same file.

// THE SAME FILE, FROM TWO OTHER CHAIRS

The same file, read by the two people with the most riding on it. Each has one decision to make, and neither has the bank's lever.

// THE MD'S CHAIR

The Clean Yes

No borrowing base, no monthly pack, no conditions. The bank read your file with judgment. What does a borrower do with that?

Read from this chair →

// THE CUSTOMER'S CHAIR

Your Supplier's Revolver

Your supplier grew 36% on your contract and its bank is funding the next step-up. Your payment terms are its revolver.

Read from this chair →

// HOW READERS ANSWER

The senior banker's read is [A].

Early days. The distribution appears here once enough readers have answered.

The tempting answer is B. The senior banker chose A. Issue 01 taught the framework — this file tests whether you learned the framework or the posture.