Converting a Liquidation into a Going Concern Sale
35
Annual Sales
5
Debt
Allied Healthcare Products, St. Louis MO
Challenge
Medical Equipment & Device Manufacturing
- Years of mismanagement and poor operational efficiency had continued to depress Sales volume..
- Growing outstanding payables stifling vendor relationships.
- Continuous labor shortages due to distrust of senior management and low wage rates despite being unionized.
- Overinflated inventory of obsolete product components (ventilators) due to the COVID boom/bust and the US government’s saturation of the ventilator market.
- No customer price increases in over 8 years.
- Sold Building in a sale leaseback transaction without the lender’s knowledge and used cash to reduce delinquent AP.
- Company was in a partial shut down mode due to lack of cash.
Solution
- MorrisAnderson was named Interim CEO.
- Negotiated with the union after the WARN notice was given to rehire 35% of the employees to increase production.
- Developed viable Turnaround Plan.
- Sourced a new lender who believed in the Turnaround Plan, refinanced the original loan, and ultimately, provided DIP financing when the Company entered Chapter 11 to execute a 363 Sale.
- Restarted operations with the leaner staff and improved profitability, liquidity and operational efficiency.
- Developed a comprehensive quality assurance plan to handle numerous outstanding FDA observations.
- Secured a stalking horse biidder to enter bankruptcy with a purchase price far exceeding liquidation scenarios.
- Reinvigorated a once dormant culture to believe in the Plan and continue working until the transaction closed.
Results
- Successful sale of business yielding 4.5x the original liquidation value.
- Paid secured lender (and DIP lender) in full and paid unsecured creditors 35%.
- Saved of over 75 jobs in NY and St. Louis
