Out-of-court restructuring and refinancing of asset-based loan facility
Consumer products – Sporting goods
This manufacturing company had seen declining sales over a four-year period and was notified by their lender that they would not renew their $25 million revolving credit loan past its maturity date six months away. Based on a recommendation from the lender, the company engaged Eric Danner and the CohnReznick team to help devise and implement a restructuring plan while concurrently driving a refinancing process.
WHAT WE DID
From the onset of our engagement, we worked together with the client’s management team and the lender to negotiate a series of forbearance agreements to give the company time to address the issues at hand. As part of the forbearance process, we produced integrated financial statements, multiple 13-week cash flows, and a three-year financial projection for use in the refinancing process. Throughout the engagement, the CohnReznick team identified and implemented opportunities for liquidity improvement and cost-reduction initiatives that included a comprehensive review of excess and obsolete inventory, staffing and payroll reductions, and process flow improvements for the shipping department. At the same time, the team created a confidential information memorandum and sourced potential lenders from the banking community, contacting more than 100 capital providers.
These initiatives were successful in reducing expenses, generating cash flow, and ultimately getting the company refinanced with new banking partners. The existing debt was refinanced by two new lenders (for a revolving credit line and commercial mortgage, respectively) that offered more favorable terms than the incumbent loan facilities. The company’s operating economics and working capital base were vastly improved, positioning the client well for its first growth period in years.