$100M Insolvent Co-Packing Company Receivership

The Situation

As the court-appointed receiver of a failing $100M co-packing company operating multiple facilities across the US, with $34M in senior secured debt and a negligible forced liquidation value, our team recovered $27.5M through a going-concern asset sale. The company lost a key customer during a period of increased competition and rising labor and overhead costs, resulting in a significant decline in cash flow, loan covenant defaults, and related litigation.

How We Advised

After failed attempts to sell the business and being unable to secure financing to pursue a Chapter 11 Bankruptcy, the company’s senior secured lender petitioned the court to appoint our team as receiver to preserve collateral, negotiate with key vendors, preserve cash flow for imminent expenses, and sell the business. Our successful recovery was achieved by:

Preserving Value: Operated the business with limited cash flow for nearly four months to preserve value while designing and negotiating the going-concern sale.
Managing Stakeholders’ Expectations: Maintained relationships with frustrated customers, vendors, lessors, suppliers, and employees to ensure operating continuity.
Securing Financing: Established a feasible budget and negotiated with the senior secured lender to provide interim financing to fund operations.
Selling the Business: Navigated a complex process to gain the court’s approval to sell the business to provide comfort to the buyer that the transaction would be free and clear of objections from intervening parties.

Obstacles & Our Solutions

The company was marketed for sale as a going concern by an investment bank prior to the receivership.
- Our team successfully negotiated an asset sale with a previously interested buyer by meeting with them to discuss and memorialize critical deal terms in writing and maintaining communication throughout the receivership to assure viability of the operating plan.
The company suffered from severe cash flow constraints during the receivership. Our team:
- Worked with the secured lender to develop a budget detailing working capital needs and a strategic operating plan.
- Negotiated with a previously interested buyer to fund operations as part of its purchase price.
- Stringently managed accounts receivable and employed creative strategies to improve cash collections by millions of dollars, such as requiring large customers with high A/R balances to settle their accounts before the company would provide additional services.
- Structured and negotiated payment plans with equipment lessors, keeping them informed to ensure production lines remained operational.
- Negotiated with key vendors owed significant payables, convincing them to continue working with the company during the receivership.
- Identified alternative vendors to reduce the risk of business disruptions.
- Analyzed customer contract profitability to justify budgeted production costs.

Key Contact

David Stapleton, CPA, CLPF
Senior Managing Director
Strategic Advisory Practice
+1 213 235 0601
[email protected]

Jake Diiorio, CTP
Managing Director
Strategic Advisory Practice
+1 213 235 0609
[email protected]

Cooper Plyler, CPA
Director
Strategic Advisory Practice
+1 213 235 0610
[email protected]

Maxwell Brandon
Associate Director
Strategic Advisory Practice
+1 858 855 1737
[email protected]

Related Practice Areas

> Receiverships
Federal and state courts, creditors, and legal counsel choose our team to serve as Receiver of distressed businesses and real estate entities. We stabilize operations and cash flow, safeguard business assets, and pursue methods to maximize financial recovery. Our multidisciplinary team applies a wide breadth of restructuring and industry experience as Receiver to take control of companies facing financial, operational, and legal issues.

> Solutions for Distressed Situations
We deliver integrated solutions for distressed and insolvent businesses that maximize recovery, mitigate risk, and restore enterprise value. Our experts are retained to help distressed organizations stabilize operations, protect stakeholder interests, and execute turnaround strategies. We take an operationally-focused approach that looks beyond the balance sheet to minimize further degradation and build a path to sustainable growth.

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J.S. Held, its affiliates and subsidiaries are not certified public accounting firm(s) and do not provide audit, attest, or any other public accounting services. J.S. Held is not a law firm and does not provide legal advice. Securities offered through PM Securities, LLC, d/b/a Phoenix IB or Ocean Tomo Investments, a part of J.S. Held, member FINRA/SIPC. All rights reserved.