Medical Device Manufacturer. $40 million sales. $20 million debt.
- Company had sold a division to a customer reducing sales and EBITDA
- Profits from Sale went to pay owners, taxes and reduce a minimal amount of debt
- New Business was slow in replacing lost sales
- New Customer would require $4 million of new Capital and $2 million of increased Revolver Availability
- With sale of division, revenue decreased by 40% and EBITDA by 60%.
- Company was distracted by sale and new Business launches were delayed
- Company Gross Margin was decreasing
- New Business was would require additional capital and increase to Revolver for assets located in the Dominican Republic
- Company had broken a covenant and bank was concerned about increasing exposure
- Liquidity was a challenge as A/R had grown and A/P was stretched
- MorrisAndersonworked with management to develop a restructuring plan
- Margin erosion had been isolated to 2 new product launches, but solutions were not being provided. Partnered with management to improve production process and reduce costs
- Created a robust model that provided multiple scenarios regarding new business to show profitability and working capital requirements
- Helped company negotiate a loan modification agreement that prevented bank from calling loans and gave comfort to investors to invest additional capital.
- New Capital of $4 million was provided by ownership group
- Bank allowed company to seek alternative funding for some equipment
- Company and Bank were able to easily understand the potential financial impact of the new business and access risk
- A/R decreased as company negotiated a large settlement with a customer and A/P was brought into acceptable terms
- New product lines improved profitability and EBITDA increased back to historical levels
- New Business Project was given green light to proceed