Case Studies

Upgrading Workout Loan Credit to a Line Credit

J.S. Held Acquires Shechter & Everett to Expand Forensic Accounting Capabilities for Family Law Disputes in Florida

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Home·Upgrading Workout Loan Credit to a Line Credit

The Situation

A well-established 40+ year manufacturer of heavy industrial machinery; customers primarily consist of government municipalities; typical build times of 4-6 months; and fixed-price contracts. The credit facility consisted of a revolving line of credit, a 20-year relationship with the lending bank.

  • Supply Chain disruptions extended production times, negatively impacting the absorption of fixed overhead; significant increases in labor and material costs reduced gross profit. The deterioration in financial performance led to a default on financial covenants. In the absence of a substantive plan to cure, the credit was transferred to the bank’s special assets department.
  • The bank lender provided forbearance, subject to the condition that the borrower engage an independent consultant to assist in returning the credit to compliance.

How We Advised

Our experts were selected by the Company as its financial consultant.

  • Assessed the profitability and cash requirements of existing contracts, and assessed the feasibility of obtaining price increases.
  • Reviewed relationships and logistic status with suppliers.
  • Reviewed bid process and made recommendations to adjust costing calculations.
  • Assessed manufacturing labor scheduling and efficiencies; assessed staffing for administrative positions; provided recommendations in several areas to improve productivity and cost efficiency.
  • Established 13-week cash flow forecasting and reporting; established rolling 4-Quarter financial forecast, including Income Statement, Balance Sheet, and Cash Flow, that included measurements of financial covenants.
  • Prepared and presented a plan to the lender that illustrated a return to credit compliance by profitability and cash flow improvements to the business.
  • Lender agreed to extend the forbearance commensurate with the Plan’s financial forecast and timeline.
  • Actual results exceeded the Plan’s projections and returned the credit to compliance, which warranted moving the “rehabilitated” account out of the bank’s special assets department back to the line.

Related Practice Areas

> Business / Operational Assessment 
Most consulting firms approach a business assessment from a purely financial perspective — our assessments provide a 360° view of a business, addressing growth drivers, profitability, and uses of capital. Along with detailed financial performance reviews and cash flow forecasting, our comprehensive Business / Operational Assessment identifies the various challenges clients encounter throughout their operations. 

 

> 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. 

Key Contact

For additional information about the engagement or to learn more about our services, contact:

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