Published on June 9, 2021
A struggling tire retailer-wholesaler had defaulted on its revolving line of credit before the COVID-19 pandemic. The lockdown’s hit to sales and cash flow was the last straw for its secured lender, who wanted out of its $15.5MM commitment.
Here’s how we helped the company right-size its business, improve cash flow, and refinance its debt.
5 Keys to the Successful Restructuring
Chronic poor cash flow management had resulted in shortfalls, rendering the company incapable of paying down or refinancing its matured $13.5MM revolver and $2.0MM letter of credit. When it could not pivot its high fixed cost business model quickly in response to the lockdowns, its secured lender advised it to hire a CRO with the goal of refinancing its debt.
As CRO, the 5 keys to our successful restructuring and refinancing of the company were:
- Negotiating a forbearance agreement with the lender, providing sufficient relief for us to work with the company’s new CFO to develop and implement a feasible plan.
- Performing a business viability assessment and devising an exit strategy for the secured lender.
- Selling properties to generate liquidity for working capital and to reduce debt.
- Simplifying the company’s overly-complicated financial reporting.
- Supporting the CFO in assessing and negotiating with take-out lenders.
Today, the company is on solid-footing with a healthy balance sheet and better operating practices.