Looking to restructure some debt stemming from acquisitions and to fund the buyout of its majority owner, Tex-Cap Concord Insurance Services—a Dallas-based insurance agency that places commercial, personal and employee-benefits business—tapped Oak Street Funding for a multimillion-dollar loan.

“Every deal of a decent magnitude will have its challenges. With this one, there was a lot of emotion around the ownership change; and the tax implications if the deal didn’t close in 2012 added a [pressing] time element,” says Rick Dennen, CEO of Oak Street, which has made some 1,700 loans since its founding in 2003.

But the pace at which Oak Street—whose loan sizes range from $10,000 to $10 million—can respond is one of the financing firm’s chief selling points over traditional capital sources.

“Speed, leverage and truly understanding the agency business are the advantages we have,” says Dennen. “A bank has cheaper cost of funds than we do—so if we’re competing with a bank and it’s all about the rate, then [the agency] is going with the bank. But nine times out of 10, the agency will run into hurdles. Banks, especially in today’s market, are struggling to put commercial and industrial assets on their books. Banks are often overzealous with what they think they can accomplish, and when the agency that started going down that path hits a stop sign, they’ll call us back, and we jump right in.”

This knowledge of how an agency operates is precisely what attracted Gaylon Brown, TexCap’s managing partner and CEO, to Oak Street. “What I really liked and what most impressed me is they know our business exactly: how we are structured, how we deal with carriers, how our cash flows,” says Brown, whose book of business is about 60 percent commercial, 25 percent personal and 15 percent benefits.

“The whole process took about two months, and we’re grateful for how quickly Oak Street responded. Like true professionals, every time there was an issue, they showed the ability and willingness to work through it,” Brown says, adding that “the deal’s covenant structure is more to our advantage” than what a bank could offer. As TexCap considers more acquisitions, “we look forward to perhaps funding them through Oak Street.”

The impact of this loan on the agency has been significant. When Dennen arrived at Tex-Cap’s offices prior to that evening’s closing dinner, the entire office of approximately 45 employees gathered around him.

“You could really sense their joy of now being liberated to focus on growth and executing on the strategy to elevate this agency to next level,” says Dennen, who notes that it’s not uncommon for agency owners reaching retirement age to become somewhat inhibited about taking risks or making big changes. The deal also allowed TexCap to give ownership stakes to some of the top-performing younger producers that it sees as its future.

Special Reports /

Speed, Agency Knowledge Provide the Edge for Oak Street

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