Restructuring & Turnaround

Organization

    $50 Million Restaurant Chain

Challenges

  • Sales had declined from $62 million in 1998 to an annualized rate of $42 Million during Q1 2002
  • Operating loss of $(4.5) million in 2001
  • Cash flow was insufficient to fund operations
  • Line of credit and trade credit was stretched to the limit

Approach

  • Closed the most unprofitable restaurant locations and implemented a major downsizing
  • Obtained a moratorium of principal and interest and sold certain owned properties to reduce debt
  • Attempted to negotiate composition agreement with unsecured creditors
  • Filed for Chapter 11

Results

  • Despite the downsizing and store closure program, the Company was unable to attain breakeven operations
  • A buyer could not be attracted to acquire the Company on a going-concern basis
  • Company was liquidated on an orderly basis

Organization

    $40 Million, 18-Unit Hardware Chain

Challenges

  • Declining sales on an overall and same store basis
  • Operating costs not adjusted to lower sales levels
  • Senior Lender demanding repayment of loans
  • Trade vendors becoming stretched
  • Lack of liquidity to finance new merchandise initiatives
  • Past due with Landlords
  • Certain stores sustaining losses on a “four wall” basis

Approach

  • Validated and monitored implementation of operating cost reductions
  • Consulted on strategy to broaden inventory offering
  • Negotiated forbearance agreement with senior lender
  • Worked with the Company to develop plan to close under performing stores, reduce operating costs, further and complete negotiations with national buying cooperative
  • Assisted Company in managing cash and vendors through Chapter 11 filing
  • Advised Company in identifying and acquiring replacement financing

Results

  • The Company emerged from Chapter 11 in six months
  • New lender provided emergence financing allowing for payment of 100% of outstanding Senior Lender loans
  • Vendors received a dividend on pre-petition claims
  • The Company’s membership in buying co-op allows for more operational and cash flow effective stocking of stores

Organization

    $3.3 Billion Airline

Challenges

  • History of substantial losses.
  • Cost structure was burdensome.
  • Viability of the Company’s “feeder” airline operation was in question.
  • The Company was contemplating Chapter 11 and was in process of determining the best location to file.

Approach

  • Assessed the financial and operational viability of the Company’s ‘feeder” airline operation.
  • Developed financial projections and cash flows in conjunction with management.
  • Developed a sophisticated forecasting model designed to test the sensitivity of profits and cash flow to changes in the Company’s major operational variables.

Results

  • Concluded the “feeder” airline was marginally viable.
  • Assisted with pre-bankruptcy planning.
  • The Company subsequently filed for Chapter 11 and emerged and then was acquired by American Airlines through a second Chapter 11.

Organization

    $40 Million Manufacturer of Wireless Communications Components

Challenges

  • The Company reported that it had misstated historical financial results.
  • Subsequently, the Company was accused of accounting irregularities and was the subject of a SEC investigation and delisting by NASDAQ.
  • Class-action and derivative lawsuits were filed by stockholders.

Approach

  • Provided the interim CEO/ President and the interim CFO.
  • Reconstituted the board of directors.
  • Retained a new public accounting firm.
  • Led an investigation into past accounting practices and reporting.
  • Designed and implemented a comprehensive communications program.
  • Restated past financial results.
  • Improved sales, cash flow and profitability.

Results

  • Achieved positive cash flow within one month and bottom line profitability within five months.
  • Increased customer contracts by 15%.
  • Achieved compliance with SEC reporting requirements.
  • Designed and implemented reliable accounting systems and procedures.
  • Increased shareholder value and confidence.
  • Recruited the permanent CEO and the CFO.

Restructuring Professionals

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