Long Term Liquidation Where Everyone Wins
25M
Annual Sales
7M
Debt
Castwell Products, Chicago Illinois
Challenge
Metals foundry with primarily Automotive Tier 1 customers. $25 million in annual sales. $7 million in secured debt.
- Multiple years of losses and current loss rate of $200K/month.
- Unable to fund current payroll and trade payables had been extended.
- Major contract ended and company unable to replace the volume.
- Vacancies in the C – Suite.
- IT systems have not been updated for 10 years.
- Delayed capital projects had impacted quality and gross margins.
- Prior consultant had lost the lender’s confidence.
- Manufacturing had been shifted to nights further complicating production efficiencies.
- Owners were unable to raise additional equity.
- Very difficult for customers to re-source parts quickly.
Solution
- MorrisAnderson led Assignment for the Benefit of the Creditors to liquidate assets.
- Company issued the WARN ACT and worked with critical vendors for raw material.
- Shut down and liquidation of business publicly announced to all parties.
- Due to the customer demand, the company produced for 8 months during COVID -19 building inventory banks for the key customers.
- Products immediately repriced to a minimum 5% gross margin and all customers assessed.
- Significant monthly surcharge plus weekly payment for all AR. All customers except one cooperated.
- Monthly cash flow moved from $200K loss to $300K profit.
Results
- Owners received multi-million dollar distribution after paying all creditors in full.
- Employees received full pay and vacation pay as the WARN ACT was extended 3 times.
- All the customers built inventory banks and transitioned to new foundries.
- 401K was closed out and moved to individual 401K’s
- Real Estate was sold with proceeds transferred to the shareholders.
- Managed during the COVID–19 to only have 2 employees test positive and they returned to work after the isolation period.
- Supplies paid for new purchases COD.
- Key employee retention program created.
