Restoration to Liquidity

Outcome:

Lender Paid Off ($7MM), Creditors and Vendors Paid off ($3MM), Residual Funds to Equity Holders (over $3MM);

Tools used:

Comprehensive Restructure / Lead M&A Team / Negotiate with Senior Lender Detailed Forecast, Cash Collateral Budget, Borrowing Base Certificate Calculations, Business Valuation.

Turning Point Team:

Eric Camm, Don Carlo

Turning Point was referred by a major national lender and engaged as the Chief Restructuring Officer (“CRO”) at a $40MM per year company that engaged in co-manufacturing and production of nutritional bars.

The business had been profitable historically but had suffered consecutive years of financial losses that had impacted working capital and resulted in the business being placed in the Lender’s workout group. When Turning Point was engaged, the lender had lost confidence in the business and was actively seeking to exit the relationship. The company was one of the largest employers in the town in which it was located, with a rich history of community service, so there were a number of considerations at stake when determining how best to proceed with the engagement.

Actions:

Turning Point immediately identified two potential pathways to restructure for the business: (1) refinance of existing lender to an alternative lender; and (2) sale of the co-manufacturing assets. Upon completion of a financial model and detailed cash plan, it became clear that while a refinance to take out the existing lender was technically possible, there would not be sufficient working capital after the transaction for the business to recover. Thus, in December 2019, the decision was made to aggressively pursue the sale of the co-manufacturing assets.

We re-engaged with 2 Private Equity groups that had previously expressed interest in the company and in less than 30 days had an executed LOI for the purchase of the co-manufacturing facility on terms that would payoff all of the Company’s debt, and leave the founder with significant capital to continue making the company’s own line of products.

During this time, faced with continued pressure due to working capital constraints, Turning Point initiated a massive restructure of the company, with more than $150,000 in monthly expense reductions. The restructure provided the business with additional runway and allowed the lender to forbear long enough to complete the sale of the co-manufacturing assets.

Outcome:

When COVID struck, we worked diligently to keep the buyer engaged in the transaction and complete due diligence, sourced a lender to process a significant PPP loan (over $2MM received), and continued to push efficiencies within the organization.

After the delay induced by the pandemic, we were able to get the deal closed, the primary lender paid off in full, the company’s accounts payable paid off, and allowed the equity holder in the business to retain significant funding to continue operations of the company’s line of products.