The Bottom Line:
As CRO of an illiquid tire retailer and wholesaler, Stapleton Group negotiated a forbearance agreement with the company’s bank, restructured operations, sold assets and refinanced its debt.
The company had defaulted on its revolving line of credit just prior to the COVID-19 pandemic. When its sales and cash flow deteriorated quickly during the lockdowns, its bank wanted out of its $15.5MM commitment. The bank’s forbearance provided sufficient relief for Stapleton to work with the company’s new CFO to:
- Improve profitability;
- Generate liquidity through property sales; and
- Refinance its revolving line of credit.
Poor cash flow management had resulted in shortfalls, rendering the company incapable of paying down or refinancing its matured $13.5MM revolving line of credit and $2.0MM letter of credit facilities. It could not pivot its high fixed cost business model quickly in response to the lockdowns, so its secured lender advised the company to hire a CRO with the goal of refinancing its debt.
Our key actions resulting in the successful restructuring were:
- Performed business viability assessment and devised an exit strategy for the secured lender.
- Negotiated forbearance agreement.
- Generated liquidity in the company by controlling cash flow and spending.
- Carefully balanced cash flow between vendor payments and reducing the bank’s line of credit.
- Sold properties to generate liquidity and pay off real estate mortgages.
- Identified and closed underperforming retail stores.
- Provided accurate financial reporting to the bank.
- Improved profitability.
- Sold aged inventory through carefully designed promotions.
- Managed inventory purchases to remain in budget without compromising sales.
- Improved inventory purchase processes.
- Simplified company’s complicated financial reporting.
- Supported CFO in assessing and negotiating with take-out lenders.