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Reorganization Case Study #1
The Company, a $170 million manufacturer of wrought iron outdoor furniture, began to experience severe liquidity problems in early 2001. Because the Company was highly leveraged and owed approximately $90 million to its bank group, the agent lender was extremely concerned about the Company's ability to service both its secured and unsecured obligations. The Company's attorneys suggested that it engage a financial professional to assist in negotiations with the bank group, initially to secure a forbearance agreement covering the critical shipping season. This lead to recommendations which it believed were critical to the near term and long-term survival of the enterprise.
In July, 2001, in conjunction with Finley, Colmer and Company, Jim Jennings was hired to assist full time in the restructuring.
Highlights of recommendations and achievements:
During 2001 and early 2002 they include:
- Assisted in negotiating a six month forebearance agreement with the lender, allowing the Company to continue to operate in the normal course of business.
- Assisted in negotiating the "terming out" of vendor trade debt totaling approximately $25million.
- Assisted in the closure of two unprofitable manufacturing plants.
- Assisted in right-sizing the Company's overhead structure, ultimately saving in excess of $3million.
Return to Profitability
The foregoing accomplishments enabled the Company's credit facility to be refinanced, resulting in an increased commitment on its revolving line of credit, which closed in January, 2002. This enabled it to meet its 2002 seasonal production requirements, and timely fill its customer order backlog.
In the summer of 2002, a voluntary out of court plan of reorganization was proposed to major creditors, which did not receive widespread support. Certain of them rejected this plan. This response necessitated a Chapter 11 Bankruptcy filing in September, 2002. In early 2003, a Plan of Reorganization was filed with the Bankruptcy Court. A final Plan was approved in the summer of 2003.
The Company successfully emerged from Chapter 11 Bankruptcy in September, 2003. Coincident with this (part of the Plan of Reorganization), Finley, Colmer and Co. successfully arranged Exit Financing.
During 2003 and 2004, the Company returned to profitability.
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