Financial Advisor to Bank Regarding Insolvent Food Wholesaler
Forensic Accounting, Strategic Planning, Negotiations, Monitoring, Asset Liquidation
The Bottom Line:
Stapleton Group helped achieve the 100% recovery of a bank’s $33.5 million loan to an insolvent national food wholesaler that had entered an ABC (Assignment for the Benefit of Creditors). As the bank’s Financial Advisor, Stapleton delivered the following services to improve upon a forecasted recovery of 32% – 53%:
- Conducted forensic analyses of major changes in company’s borrowing base.
- Analyzed and quantified potential orderly and forced liquidation options.
- Represented bank’s best interests in developing a strategic plan to liquidate guarantors’ real estate assets to repay loan.
- Monitored bank’s collateral throughout the liquidation process.
- Advised the bank and its counsel during going-concern sale negotiations.
The Business Issue:
The 45-year old family-owned food wholesaler served national accounts from operations in multiple states. After installing a new ERP/Inventory Management System, the company suffered liquidity problems, exhausted its credit facility, and its operations deteriorated rapidly because it was unable to fulfill customer orders. The insolvent company entered an Assignment for the Benefit of Creditors (ABC).
Genesis of Stapleton’s Engagement:
Upon discovering a $10+ million over-advance on the company’s line of credit, its bank retained Stapleton Group as its Financial Advisor to investigate the source of the over-advance. The engagement was expanded to include representation of the bank’s best interests throughout the ABC process.
Obstacles and Stapleton’s Solutions:
- The company attributed the bank’s over-advance to a failed ERP/inventory management system implementation:
- Stapleton worked with the company’s IT department to gain access to its accounting system.
- Stapleton completed a forensic accounting analysis to calculate accurate historical and projected borrowing bases.
- Stapleton reviewed the bank’s internal collateral audit reports and provided recommendations to prevent or reduce the severity of similar occurrences in the future.
- The company’s CFO and other accounting personnel resigned shortly after Stapleton’s appointment, thereby obscuring the bank’s visibility of its collateral position:
- Stapleton collaborated with key operations personnel to quantify inventory located in warehouses across 6 different states.
- Stapleton provided tools to the Assignee and the company’s accounts receivable personnel for the management of a $10.3 million A/R balance.
- The Assignee was inundated by litigation with company vendors who were proponents of an involuntary bankruptcy:
- Stapleton performed a liquidation analysis to outline recoveries under multiple scenarios.
- Stapleton supported the Assignee by assisting with A/R collections management, analyzing saleable inventory, and reviewing supplier and customer contracts to maximize liquidation options.
- Stapleton generated a collateral dashboard to keep the bank apprised of its secured position.