RigNet
RigNet is a leading global provider of managed communications, networks and collaborative applications dedicated to the oil and gas industry.
Founded in 2001 by a collection of oilfield communications industry veterans, RigNet was experiencing hyper-growth when we first met them in early 2006. Due to rapid advances in technology, oil rig & platform communications systems were migrating from being owned and operated by the rig owner to a service offering from third party providers.
RigNet benefited from this transition but needed incremental capital to help fund the upfront expenditures necessary to equip a rig with permanent, secure IP networks that could accommodate the intense data transmission needs of the rig owner and the E & P companies residing on the rigs. While the underlying service contracts that RigNet was securing were for 36-48 months, the payback on the upfront capex was 24 months; as such, RigNet quickly outgrew its credit capacity under its bank agreement and needed a source of patient, permanent working capital.
With the understanding of the working capital constraints created by RigNet’s hyper-growth and capex, Escalate structured a mezzanine investment that allowed total funded debt to EBITDA to exceed traditional debt financing parameters and adequate time to (i) further build enterprise value before returning to the private equity market and (ii) achieve profitability before returning to the senior credit market.
By mid 2007 RigNet had tripled run rate revenues when an acquisition opportunity arose that would almost double the size of the company and could be financed with traditional senior debt. Accordingly, Escalate was refinanced out its loan investment, without penalty, in conjunction with a preferred equity raise and a $30M senior financing to finance the acquisition.
In 2009, RigNet generated over$80M in revenue and on December 16, 2010 completed a $60M IPO on NASDAQ.
Escalate’s financing provided RigNet the growth capital it needed to generate cash flow and create meaningful enterprise value to execute its growth initiatives.