Reducing Inventory Allows for Refinancing

Challenge

$600 million distributor of frozen seafood. Separate lobster procurement and processing operations on East Coast. $175 million bank syndicate loan.


  • Company financial performance dropped from EBITDA of $25 million/year to $2 million/year as result of large inventory losses when frozen shrimp pricing dropped and losses on start-up lobster processing facility.
  • Company had bloated inventory position with turns at 3X/year and almost $10 million of aged ineligibles.
  • Losses on lobster processing operation were $4 million/year and could only be cut to loss of $2 million/year.
  • Loan was a bank loan and company leverage was 5X under best case projections, so regulated bank lenders had to exit.

Solution

  • Inventory needed to be reduced.
  • Aged inventory needed to be sold.
  • Money losing lobster production needed to be shutdown.
  • Cash had to be managed to a borrowing base formula.
  • Loan needed to be refinanced to an asset-based facility.
  • 10-member bank group needed to be kept informed and supportive during the process.

Results

  • Inventory was cut by $25 million (over 20%) over 9 months.
  • Aged inventory was sold and reduced from $10 million to $2 million.
  • Money losing lobster processing operation was shut down.
  • Company was refinanced to an Asset-Based Lender.

Daniel Wiggins

Daniel Wiggins is a Managing Director at MorrisAnderson with notable turnaround and transaction experience. In building value for his clients Daniel focuses on enhancing stakeholder relationships that optimize business continuity and he frequently leads negotiations with clients’ key suppliers, customers, and lenders – particularly during restructuring initiatives. An additional focus of Daniel’s engagements is mentoring… Read More

Daniel F. Dooley

Dan Dooley, CTP, is a Principal and CEO at MorrisAnderson based out of Chicago. He has a strong national reputation in crisis management, operations improvement, debt refinancing/restructuring and C-level positions. He is a frequent speaker at industry conferences and a regular author for industry periodicals. Dan has served on the Board of Directors of both… Read More