Wind Down of Unprofitable Business, While Expanding Good Operations

Challenge

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Metal Stamping for Automotive Industry. Revenues had shrunk from $200 to $87 million. $10 million in senior debt and $60 million in sub debt. Four US locations, one Mexican operation.

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• Inability to procure raw materials due to negative cash flows.
• Due to the recession in the automotive market and softening in the construction HVAC markets the Company experienced a significant drop-off in sales.
• With the exception of the Mexican operation which specialized in HVAC stampings, all the US facilities were bleeding cash.
• The Company was in default on approximately $10 million in secured debt from their senior lender and had almost $60 million in subordinated debt from the management team and Executive Board.

Solution

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• MorrisAnderson led the aggressive wind-down of underperforming facilities including the restructuring and consolidation of the more profitable Mexican operation.
• The turnaround of the business was accomplished outside of bankruptcy proceedings to protect equity’s substantial investment.
• MorrisAnderson was able to successfully manage cash for six months, stave off the senior lender and vendors and engineer an option for equity to see a return on their investment.

Results

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• As a result of MorrisAnderson’s structured and aggressive turnaround efforts, the client was able to address their key issues, wind-down all of their US facilities, ramp up operations in Mexico, sell-off several million dollars in M&E and facilities, pay off the senior lender, and achieve positive cash flow from remaining operations in approximately six months.
• All this was coordinated and managed while avoiding a forced liquidation/bankruptcy by the lender.