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Turnaround and Workout of Food Processor: Providing Solutions and Guidance
Situation:
A $50 million food processor was facing a series of difficult financial and operational challenges. The owners were deadlocked in a bitter legal battle. Attempts to sell the Company by the owners had recently failed as the potential buyer was not willing to meet the owners’ terms. The company’s bank loans were in default due to significant recent operating losses and the bank was experiencing lender fatigue due to the difficulties. The company’s payables to non-food vendors were stretched. The company was forced to close one of its plants due to condemnation proceedings for a public works project. Construction of a new replacement plant was significantly behind schedule and the company lacked the funds to complete the construction. The company was in danger of serious service interruptions and running out of options and time.
Task:
LMG was retained to negotiate with the company’s lender and creditors and to perform the interim CFO duties until a new CFO could be retained.
Action:
LMG was successful in negotiating with the construction general contractor to complete the build-out of the new plant by obtaining additional funds in excess of the collateral formula from the principal secured lender to pay the contractor. LMG also facilitated a sale lease-back of the company’s other plant which provided funds to bring the secured lender back into formula and to provide for a redemption of the one of the owner’s stock in the legal proceedings. LMG assisted in consolidating the accounting and finance functions from two plants to one, acting as interim CFO during the process and assisted in negotiations with a new lender who provided a new working capital loan.
Result:
Net savings achieved through the consolidation and operating in a new, more efficient plant allowed the company to return to profitability.
