CRO / Turnaround of Tire Retailer & Wholesaler

Forbearance Negotiation, Strategic Plan, Asset Sales, Refinancing

CRO of Illiquid Tire Retailer / Wholesaler

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.

Successful Restructuring:

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.
  • Inventory:
    • 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.

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