Horse bedding producer Klassen Wood Co. of B.C. secures $1.5M growth financing from BDC Capital
VANCOUVER, June 23, 2020—Klassen Wood Co. of New Westminster, British Columbia, which manufactures wood chips and packages wood shavings, has obtained 1.5 million dollars in non-dilutive financing from BDC Capital’s Growth and Transition Capital division to sustain the growth of its business. The main market for Klassen Wood’s products is bedding for horse stalls and other large pets, but it also supplies engineered wood fibre for children’s playgrounds.
Established in 2015, the company quickly introduced technological innovations that dramatically increased productivity, setting it apart from the traditional producers that make up most of the industry. Known for its quality bedding of white pine and fir, Klassen Wood exports the majority of its production to the United States which is home to the largest population of horses in the world. Since its foundation, the company has grown sales annually at a compound rate of nearly 60%. In recent times, Klassen Wood has been relatively spared by the crisis triggered by COVID-19, as the decline in the demand from equine sporting and livestock events, most of which were cancelled, has been made up by purchases from ranch and stable owners who have had to keep their horses at home. As in Canada, animal bedding was classified as an essential product by U.S. authorities, which has allowed cross-border shipments to be maintained.
The wood fibre Klassen transforms and packages at its facilities are the by-product of lumber mills in the Pacific Northwest. The funds provided by BDC Capital are being used to finance capital improvements at one of its key suppliers as part of a novel, long-term agreement to provide Klassen Wood with a steady source of wood fibre. This guaranteed supply will enable the company to continue to grow its sales as the horse bedding market is consistently underserved. BDC Capital’s financing takes the form of a mezzanine loan whose conditions were tailored to the company’s cash flow forecasts and which features a patient balloon payment at maturity that comes with the flexibility of early cash sweeps. The loan also serves to free up some of Klassen Wood Co.’s liquidity to further upgrade its own facilities and diversify its sales efforts.
This financing was arranged by Kyle Duignan, Director, Growth & Transition Capital at BDC Capital’s Vancouver office. “John-Mark Ferguson and his team have brought innovation to an industry that had largely remained the same for decades, which has resulted in higher margins and faster growth,” explains Duignan. “As we’re seeing now, Klassen Wood is in a line of business that’s fairly recession resistant, since customers are typically more focused on product quality and horse bedding remains a necessary consumable for them.”
“It has been a pleasure working with Kyle and the BDC Capital team members. It’s wonderful having a lender who understands the realities and importance of cash flow for a growing company,” said John-Mark Ferguson, CEO, Klassen Wood Co.
About Klassen Wood
Klassen Wood Co. is dedicated to offering the highest quality wood shavings and engineered wood products with enjoyable service and competitive prices. We do this by continually improving our production standards and raising the bar within the industry. Our goal is to serve our customers and do a little good along the way.
About BDC Capital
BDC Capital is the investment arm of BDC, the bank for Canadian entrepreneurs. With over $3 billion under management, BDC Capital serves as a strategic partner to the country’s most innovative firms. It offers businesses a full spectrum of capital, from seed investments to growth equity, supporting Canadian entrepreneurs who have the ambition to stand out on the world stage. Visit bdc.ca/capital.