The Bottom Line
As bank-appointed receiver, Stapleton Group maximized the lender’s financial recovery and preserved a decades-old family-owned business by:
- Transforming raw materials into higher-valued finished inventory;
- Selling existing and newly-completed inventory to credit-worthy customers on strict terms, generating cash and high-quality accounts receivable;
- Managing the collection of $2.0 million in troubled receivables; and
- Running a competitive sellside M&A process, ultimately selling property and the business to the borrower’s heirs at a much higher value than would have been achieved through a forced liquidation, saving jobs and the family legacy.
The Business Issue
The Southern California-based manufacturing and wholesaler of high-end concrete fountains and garden art, with roots dating back to the early 1900’s in Italy, invested in a second facility in Tennessee to reduce trucking costs. However, key management did not invest their time at the new facility, resulting in inferior products. The large investment of capital, problems associated with the inferior products and the onset of the 2008 economic recession together took a great toll on the company’s liquidity.
Genesis of Stapleton’s Engagement
The company defaulted on its credit agreement so its bank forced it into receivership. The bank and its counsel appointed Stapleton Group as receiver in early March 2009 and conveyed their goal to liquidate the company as quickly as possible.
Obstacles and Stapleton’s Solutions
- The lender wanted to commence liquidation in March, a few months before the company’s summer high season for sales and accounts receivable collections.
- Stapleton established and implemented a strategic plan to keep the business operating through its high season.
- Stapleton successfully transformed raw materials into finished products, generating a much higher return of capital to the lender.
- Stapleton was able to collect on pre-receivership accounts receivable by staying in business until customers generated cash from sales of the products.
- Vendors would not extend credit to the company due to its failure-to-pay invoices and financial condition.
- Stapleton leveraged long-standing relationships between vendors and the extended family of the company’s owners to negotiate delivery of materials on terms.
- Vendors gained comfort with a third-party receiver managing the business.
- The company did not have any working capital to run operations and pay its bills and its labor costs were high due to overtime.
- Stapleton aggressively managed accounts receivable collections to fund operations.
- Stapleton cut costs, working with the owners to carefully manage the workforce to eliminate overtime.