Case Studies

Assisting Lender Group to Reduce Loan Exposure

J.S. Held Acquires Clark Seif Clark, Strengthening West Coast Capabilities for Environmental Claims, Disputes, and Catastrophe Response

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The Situation

Tank Barge Operator. Net revenue down 11% to $220 million. $175 million debt. 64 tank barges, 66 tugboats serving major oil companies, oil traders, and refiners. 4.1 million barrels of capacity. 91% double hull (the largest coastwise tank barge fleet in the US).

  • EBITDA declined by $40 million to $56 million
  • Reduced demand for petroleum products, driven by declines in consumer gasoline consumption, combined with decreases in wholesale prices and margins of refined oil products, while crude oil pricing increased, severely impacted margins.
  • Cutbacks in refinery utilization adversely affected demand for vessels.
  • Oil companies shifted from long-term time charter contracts to spot market purchases. K-Sea time charters under contract (as a percent of capacity) declined from 74% at year-end FY09 to 49% at year-end FY10.
  • The company had a limited ability to reduce costs sufficiently to offset reduced revenues and was overleveraged.

How We Advised

Our experts served as financial advisors to the senior lenders, assessing the business plan and macroeconomic factors, as well as options for operational improvements and potential financial restructuring.

  • We determined that the business model was sound and pushed for a plan to reduce leverage based on long-term economics.
  • The company closed a $100 million equity infusion, along with $16 million in proceeds from other asset sales, which reduced total funded debt to $279 million (total funded debt/EBITDA of 4.3x).
  • Deleveraging mitigated risk to the bank group and adequately restructured the capital structure imbalance.
  • Cash flow and availability are projected to be sufficient to fund operations.
  • Enterprise value analysis indicated reasonable coverage of outstanding debt in all scenarios, including a downside case.

Key Contact

Dan F. Dooley, CTP 
Senior Managing Director 
Strategic Advisory Practice 
+1 603 660 8952 
[email protected] 

Related Practice Areas

> Business Plan Validation 
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. Our team delivers hands-on guidance and independent analysis to lenders, creditors, legal counsel, executive teams, boards of directors, and investors. 

 

> Turnaround and Restructuring Services 
Navigating the many challenges confronting a company in transition requires an operationally focused approach that looks beyond the balance sheet to minimize further degradation and build a path to sustainable growth. Drawing upon decades of experience in the turnaround space, we help companies in transition identify practical strategies to improve profitability and liquidity for immediate relief, while concurrently developing and executing a comprehensive turnaround plan for long-term, sustainable value creation. 

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