ABC of Manufacturer & Contractor

Interim CEO/CFO, Cash Flow Management, Sellside M&A

ABC Cabinet Contractor

The Bottom Line: 

In an Assignment for the Benefit of Creditors (ABC), Stapleton Group achieved a recovery 3-4x greater than could have been accomplished in a Chapter 7, saved jobs and ensured customers’ projects were completed by:

  • Negotiating a payment plan with the largest creditor, which had liens on A/R, to keep the business operating until it was sold;
  • Identifying prospective buyers who would complete the debtor’s contractual work-in-process so pre-existing A/R could be collected for the benefit of pre-existing creditors; and
  • Applying the sale proceeds to pay priority liens, such as payroll and past-due taxes.

The Business Issue:

After multiple years of mismanagement and poor A/R collections, the cabinet manufacturer and carpentry contractor was illiquid and headed toward a Chapter 7 liquidation.

Genesis of Stapleton’s Engagement:

The company’s attorney recommended hiring Stapleton Group to assess alternatives.  Stapleton determined that an ABC would yield the best outcome for all parties involved.

Obstacles and Stapleton’s Solutions:

  • Mechanics liens on certain projects limited A/R collections, impeding working capital.
    • Stapleton negotiated with the vendor holding the liens to attain a favorable payment plan, enabling the ABC to proceed.  
  • The company faced IRS liens for past-due payroll taxes, overdue accounts payable, vendor disputes and pending eviction for overdue rent.
    • Stapleton negotiated a favorable long-term payment plan with the IRS.
    • Stapleton analyzed the final payroll for terminated employees pursuant to California law.
    • Stapleton sold assets (equipment, raw materials and certain WIP contracts), applying the proceeds to pay priority liens. 
  • The company lacked working capital to complete customer contracts to generate revenue.
    • Stapleton negotiated the sale of assets to a buyer willing to fulfill pre-existing contracts.
    • Stapleton aggressively collected outstanding A/R and A/R generated by the completed contracts for the benefit of creditors.

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