Sample Engagements: Turnaround & Restructuring Advisory

Online Marketing & Media Company

Overview: An e-commerce lead generation company for the telecommunications and cable industries. The company was a leader in outsourced online-marketing and customer-acquisition for every major telecom and cable operator in the United States. The company had more than 1,000 employees with operations in six countries. Following the default on $45MM in debt which resulted in a liquidity crisis, we were engaged to stabilize the cash flow, improve profitability, refinance the company and manage the organization through an organizational upgrade of talent. Charles Fraas assumed the role as Chief Restructuring Officer, staffed an interim CFO as well as various other interim positions to support the restructuring.

Stabilization – Within 90 days, we reduced overall SG&A by $9MM on annual run rate, sold a division and closed a division. The stabilization effort enabled the company to generate positive free cash flow for the first time in three years.

Interim Management – Managed the lender-negotiated exit of the CFO, the CEO, the Chairman, the COO / VP of Operations and the VP of Customer Service, and supported the transition of all new leadership. This process was completed during the first 120 days of the engagement.

Refinancing – The senior secured lender was purchased by the junior lender. Following the debt purchase, we negotiated a new credit facility and sourced additional investment to grow the business.

Out-of-Court Settlement Process – Led a process to settle $20MM in outstanding aged payables across 600+ vendors and $15M in estimated legal contingencies via an out of court settlement process to avoid a bankruptcy filing. The primary asset of the company was five customer contracts that represented over 50% of sales revenue and a bankruptcy filing would have allowed the key customers to exit the contracts.

Results – At the end of the engagement, the company was projected to produce $3MM in EBITDA in Year 1, the first profitable year for the company in over four years. The lender experienced greater than a 100% recovery of their original financial position.

Next Generation Vending

Overview: Next Generation Vending services 26,000 vending machines across New England. We led the turnaround and restructuring of the company following a default on $32MM in debt. The vending industry has experienced -5% CAGR declines over the prior four years and was contemplating a Chapter 11 filing when Charles Fraas was hired as the Chief Restructuring officer and staffed a COO. Charles also assumed the Chairman of Board of Directors, filled a second board seat with a member of his firm and is the court appointed receiver in the Chancery Court of Delaware for the wind-down of the holding company following the sale.

Stabilization: Migrated the company from ‘burning’ ~$4MM in cash annually to having a break-even free cash flow in five months, the first time in five years that the company was able to fund itself from operations. The investors, management and lenders did not need to contribute additional capital to the company during the entire time we assumed responsibility as the CRO.

Turnaround: Drove up the EBITDA by $5MM annually via SG&A reductions and the following changes to operations:

Improved retention of customer and account profitability: Account profitability improved by more than 20% by renegotiating all key customer contracts and altering the pricing structure. In addition, sales churn became net positive during the course of the first ten months (net new sales exceeded lost accounts).

Distribution Network Redesign: Redesigned the network across 17 distribution centers to both rationalize labor and optimize service frequency. Resulted in improved fill-rates, reduced stock-outs and 20% fewer routes.

Refinancing: No additional financing was required because the organization was able to finance itself following the restructuring effort.

Exit / Sale: Managed the break-up of the company into nine regions for sale to recover approximately 80% of the outstanding principal from proceeds of the sale.

Bankruptcy Support: Appointed receiver of the holding company in the Delaware Chancery Court where the holding company was terminated

Distributor of Aftermarket Aviation Parts

Overview: An international distributor of aftermarket aviation parts to 800+ airlines and MRO’s around the globe. The company defaulted on $60M of loan obligations and we were hired to lead a turnaround and restructuring of the company. Charles Fraas was appointed Chief Restructuring Officer / Interim President and engaged an interim CFO.

Turnaround and Stabilization: Replaced the existing CFO with an interim CFO and led the company through a rapid 90-day cost reduction campaign to stabilize the financials and lead the company to break-even cash flow. After reaching break-even cash flow, we embarked on a second wave of profit improvement activities that launched 2 new service lines to further enhance profitability. The result was $7M improvement in profitability on an annual basis.

Management And Sales Team Redesign: Sales have lagged behind competitors for the prior two years. We embarked on an enterprise-wide organizational redesign and talent upgrade to address market penetration and account development issues. This led the to the replacement of ten senior sales, account management and business development resources and the hiring of over $2M of new resources in five months. We also completed a CEO search to replace the existing CEO.

Liquidation of Assets: Led a liquidation of 50% of inventory inside the on-going operating entity and monetized nearly $5M of other long-term assets to reduce leverage.

Refinancing: Led a process of negotiating a global settlement and forbearance between the primary lien, secondary lien and equity holders of the company to allow the company a two-year period to pay down leverage, avoid a Chapter 11 / 7 filing and recapitalize the company