Franchisor Works Down Credit Exposure and Allows Company Refinancing
100M
Annual Sales
15M
in Debt
Great Lakes Ace, Farmington Hills Michigan
Challenge
$100 million retailer franchisee of home improvement and garden products with approximately 50 stores throughout the Detroit metro area. $15 million debt.
- Company previously operated a chain of 65+ stores under an independent name selling low-cost home improvement and garden products throughout the Detroit metro area
- Company began reformatting all of its locations as Ace Hardware locations, and re-opened almost 50 locations
- Distribution was also shifted from a centralized warehouse to a direct-to-store shipment model
- Conversion was to be funded by liquidation sales, but an unfavorable contract with the liquidators resulted in the company being significantly short on the funds necessary to complete the store conversions
- Additional funding was generated by not paying for Ace merchandise shipped to new stores, resulting in a significant unsecured trade obligation to product supplier Ace Corporate beyond the bank debt
Solution
- MorrisAnderson did an independent assessment of business operations and sales and earnings forecasts to evaluate whether company was viable and could pay down its trade debt while staying within constraints of its ABL loan
- Determination of management strength and whether key personnel would be able to successfully execute the operational turnaround and store conversion plans
- Ace provided operating consultants to assist with remaining transitions and store performance improvement initiatives; additional inventory investment was necessary to complete conversion
- Complete sale of now unneeded warehouse facility to reduce debt
Results
- Assessment confirmed that ACE Corporate should continue to support Company and its continued operational improvements
- ABL loan was refinanced based upon quality of inventory, support by ACE Corporate and improving EBITDA
