Torrent Bay Bottling Ltd, the cfo's chair: What do you do on Friday?

// DRILLS / ISSUE 11 / TORRENT BAY · CFO

ISSUE 11 · 2026-10-13 · 5 MIN READTHE SENIOR READ — MICHAEL

Match It by Friday

TORRENT BAY BOTTLING, FROM THE CFO'S CHAIR

MANUFACTURING · THE CFO'S CHAIR · DIFFICULTY 3/5

// YOUR DESK

Your bank, nine yearsPrice matched in full

Its structureBorrowing base · 50% on stock

The other bankNo borrowing base · 65% on stock

Your warehouse~70% in customers' labels

Your deadlineFriday — you set it

What do you do on Friday?

Read your desk

// ONE FILE, THREE CHAIRS

// THE LENDING CHAIR · ISSUE 11

The Term Sheet War

Read from this chair →

// THE CFO'S CHAIR

Match It by Friday

You are here

// THE PRICE-SETTER'S CHAIR

Forty Points

Read from this chair →

// THE SETUP

You are the CFO of Torrent Bay Bottling, a contract bottler making private-label soft drinks, waters and functional drinks for supermarket chains and brand owners: US$24m of revenue, nine years with the same bank, never a missed payment. On Monday you forwarded it a competitor's term sheet with one line: “We'd rather stay. Match it by Friday.” The sheet was real — forty basis points inside your pricing, no borrowing base, and an advance of 65% against your stock where your bank lends 50%.

Your bank has answered. It matched the price, in full. It kept the borrowing base and the 50% advance, and said why in two sentences: about 70% of your warehouse at any time is finished goods in your customers' own labels, worth full value inside those relationships and very little outside them, and an advance rate exists for the day it has to be sold outside them. It added that if you can show a genuine resale channel for that stock, the advance will move with the evidence.

The competitor's relationship manager rang this afternoon to ask whether you had decided. The extra fifteen points of advance would free real cash, and a growing business can always use it.

It is Thursday. What do you do on Friday?

// FY25 SNAPSHOT

SOURCE: TWO TERM SHEETS · YOUR BANK'S REPLY · COMPOSITE CASE — FICTIONAL

PRICE GAP

0 bps

matched in full

ADVANCE ON STOCK

50% vs 65%

yours vs theirs

BORROWING BASE

Kept

▼ theirs has none

BRANDED STOCK

~70%

customers' own labels

RELATIONSHIP

9 yrs

never missed a payment

An advance rate is the share of a stock's value a lender will lend against, set by what the stock would fetch if the lender ever had to sell it. Stock made for one customer, in that customer's label, usually fetches far less in that sale than stock anyone could buy.

// YOUR JUDGMENT

What do you do on Friday?

[A]Take the competitor's offer — more borrowing against the same stock, no borrowing base, and a bank that has shown it wants the business[B]Stay at the matched price, and take your bank up on its offer: show it where your stock can really be sold, and let the advance move with that[C]Take your bank's reply back to the competitor for a sharper price, then give your own bank one more round before anyone signs[D]Split it — move the stock facility to the competitor for its higher advance, and keep everything else with the bank you know

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

Start by noticing that the question has changed since Monday. On Monday it was price, and your bank has taken price off the table. What is left is two different answers to a different question: how much will a lender lend against a warehouse full of other companies' labels? One lender has answered by walking the warehouse. The other has answered without asking.

That is what makes A so tempting and so thin. Fifteen more points of advance is borrowing capacity against the scenario in which you would most need it — a bad year, a lost customer, stock that has to be sold to someone who is not the brand owner. That is also the scenario in which the new lender will look at your stock properly for the first time, and a lender that finds it has lent 65% against labels nobody else may sell tends to take the capacity back when you are least able to replace it. D buys the same risk on the facility that matters most and adds a second bank to every conversation. C is shopping with the price already matched: each round moves nothing but both lenders' view of how you behave when a relationship is on the table.

The senior banker in the CFO's chair chooses B, and takes the second half of the bank's reply as seriously as the first. Stay at the matched price — there is no saving left in moving, only the costs of it — and then go after the thing you actually want, which is more borrowing against your stock. The bank has told you what moves it: evidence. Show it which of your stock can be sold outside the customer who ordered it — the unbranded lines, the formulations you own, a brand owner who will take back its own label at a known price — and let the advance on that part move. That is extra cash with a floor under it, from a lender whose numbers will still be the same numbers in a bad year.

It is also a better answer to the competitor than any counter-offer. A term sheet that advances against a stock code without looking at the stock was not a better deal. It was a less informed one, and the difference would have been paid by you on the day it mattered.

Price was the market's question, and it has been answered. The advance is a question about your warehouse — answer it with evidence, not with a second bank.

// THE SAME FILE, FROM THE OTHER CHAIRS

Three people read this file in the same week, each from their own side of it. Only one of them holds the bank's lever.

// THE LENDING CHAIR · ISSUE 11

The Term Sheet War

A nine-year client brings a competitor's term sheet: 40 basis points inside your pricing, covenant-lite, and a Friday deadline.

Read from this chair →

// THE PRICE-SETTER'S CHAIR

Forty Points

A nine-year client, a competitor's signed term sheet, and a request on your desk to price forty points below the card by Friday.

Read from this chair →

// HOW READERS ANSWER

The senior banker's read is [B].

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

The tempting answer is A. The senior banker chose B. The reading explains what an advance rate is for, and why the extra borrowing on offer is against the one scenario in which you would need it most.

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