Petrobanc Finance Blog

CSP magazine highlights changes to economic landscape for commercial lenders and gas station loan borrowers in the C&G industry

In its February 2009 issue, CSP magazine published an article titled Brave New World  that addresses the upheaval in the national economy and its impact on the Convenience & Gas industry.

For the small independent operator, the message is clear – opportunity will abound in 2009-10 for those who are prepared. Major oil companies are selling gas station sites, industry consolidators are buying gas station chains and flipping sites to dealers, and operators that are selling their gas stations are having to accept less. Sale prices are returning to more traditional levels – where sites used to sell for 5x to 7x EBITDA (Earnings before Interest, Taxes, Depreciation, Amortization), they are now selling for 4x to 5x.

What does the independent operator need to do to position himself for acquisitions? As we’ve described previously in this blog post, cash will be the determining factor. Higher down payments – 30% or more – may be required to obtain financing. Finding a lender will be difficult, but operators with strong business plans, strong resumes, and professionally prepared financial statements will have a better chance. For more information, see our recent entries on Looking for financing? Wondering what lenders look for? , How lenders evaluate your gas station business, and What are the steps to approval for your gas station loan?

The CSP article focused on these key factors in obtaining a commercial loan for your gas station/c-store business:

Credit sources will be scarce. This will drive creative financing and attract a new breed of lenders. With the current lack of national lenders, local and regional banks will only be able to absorb so much of the demand. New sources of capital from overseas and non-traditional lenders will be complemented by seller financing, mezzanine structures (multiple lenders) and sale/leaseback.

The industry ‘power center’ will shift toward super-jobbers and industry consolidators, as major oil companies reduce their ownership of retail assets. Jobbers will continue to grow, acquiring not only major-oil chains, but also smaller competitors. With jobbers taking control, the old DTW pricing structure will gradually give way to rack-plus pricing, leveling the playing field for dealers in many markets.

Small operators will see new opportunities. Where the majors and the super-jobbers are buying and selling whole markets, they won’t keep every site they buy, either due to operating parameters or because the jobber needs to stabilize their capital base. In order to keep the supply contract for these sites, the jobber will sell them only to independent operators.

Petrobanc Finance believes that now is the time to establish strong relationships with growth-oriented jobbers and financial institutions, as you prepare your own organization for growth.

Author: Kevin Morley

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