Turnaround Management

L. R. Nathan Associates has established an excellent reputation over the years among financial institutions as a trusted advisor to their customers who are experiencing operating and financial difficulties. We are approved by most commercial banks to guide their troubled credits through the “forbearance” process during workouts, turnarounds and crisis management situations. The firm’s principals are quick to identify root problems, to develop plans for financial and operational improvements, to assist client companies in the implementation of those plans, and to realize cost savings. In many cases, we have been successful in reinstating normal banking relationships. In others, we have been able to recapitalize businesses and repay their anxious banks in full.

The following are examples of actual cases where we have assisted client companies in turnaround and crisis management situations, bankruptcy avoidance and defaulted debt restructuring and refinancing –

A Rhode Island-based 54-year old manufacturer of high end lighting fixtures was suffering sizable losses due to competition from China and excessive raw materials inventory on hand. Cash flow was inadequate to service the $7.8 million in debt owed to Fleet Bank, and the Bank was contemplating a liquidation of its collateral. During the 2-1/2 year span of our engagement, we managed the orderly sale of certain assets and were able to reduce the Fleet debt by 71% to $2.3 million. We then completed the refinancing of this balance and the Bank was paid in full.
The owner of two Connecticut home heating oil delivery companies was under extreme pressure from his bank to sell assets and repay his excessive leverage. While current operations were satisfactory, the companies suffered from cash shortages resulting from losses incurred in an operation that had been sold two years earlier. We advised our client and his management team through a series of forbearance extensions with the bank, as well as strategies to preserve his ownership of the businesses outside of bankruptcy and to avoid losing personal assets that had been pledged to secure his personal guaranty – all the while maintaining the bank’s trust and patience. After more than a year, we were able to execute the sale of the bank’s loan position at a 60% discount to a group of industry investors, as well as to settle with other key creditors. Our client retained his controlling interest in both companies.
A Hartford, Ct. based snack food manufacturer was undergoing operating and cash flow problems, as sales growth had stagnated and caused covenant violations with their bank. We assisted management to reduce costs, improve cash flow and restructure its pricing and sales policies. Based primarily on the significant improvement in operations, the company was able to complete a refinancing to repay the bank in full.
A 19-year old, Western, Ma.- based producer of high performance thermoplastic parts was undergoing operating problems in the face of excessive leverage when we were retained. Cash flow was inadequate to service the debt owed to Citizens Bank. We assisted management to implement a number of operating improvements and achieved a turnaround in net income to over $400,000 in the following fiscal year, with debt service coverage improving to 1.20 times despite flat year-to-year revenues. We also assisted the company to negotiate an eight month forbearance agreement and the eventual full payoff of Citizens Bank.
We directed a Hartford, Ct. area manufacturing company to 16 profitable months of operations as the crisis manager and acting CFO after they had filed for Bankruptcy. The company had been unprofitable for a number of years and was hemorrhaging severely. The business was turned around and ultimately sold as a going concern. Fleet Bank was the lender and was able to sell its loan to the buying group.
We closed on a $2.55 million recapitalization package for a Connecticut-based client that manufactures high speed thread-forming taps. The Company had incurred losses over the prior three years, but was profitable in the current year due to some significant cost restructuring. The proceeds of the financing fully repaid Webster Bank, which had sought an exit from the situation, and also provided plentiful working capital for the business going forward.
We completed a $5.5 million financing for a Norwalk, Ct. & New York City temporary staffing company client that was being forced out of Wachovia Bank. The staffing industry was in a prolonged downturn at the time, and was especially difficult to finance due to limited tangible assets. We structured and closed a transaction that repaid the Bank in full, while providing sufficient working capital to enable to business to return to profitability in the early stages of the economic recovery.
A successful distributor & refurbisher of bar coding equipment was caught in the midst of a dramatic business downturn in late 2008/early 2009, which resulted in certain bank loan covenant violations and a severe cash crunch. We were able to quickly identify the issues and determine the validity of management’s corrective actions. We then developed a presentation to the bank of the issues, the measures that were under way, and a detailed short-term financial plan. The results of this brief engagement allowed the company to get a Forbearance Agreement in place, obtain additional funding and return to a calm, more trusting commercial banking relationship.