Helping Owner Salvage Value After Industry Collapse

The Situation

Machine shop manufacturer of precision tooling and parts primarily for aerospace and packaging industries. $160 million in annual sales. $60 million credit facility, five bank lenders. $13 million equipment leases, four lessors.

Company grew via acquisitions funded by bank debt – high leverage and tight liquidity.
Company incurred loss issues with integrating two of the recent tuck-under acquisitions. Delays in transitioning accounts resulted in push-out of shipments/revenue causing a significant miss to financial projections and triggering defaults to FCC and Leverage covenants.
Lenders decided to exit the credit, forbear on defaults with tight timeline for refinancing. Company obtained terms from non-bank to refinance in 90 days.
Then a dramatic decline in business and leisure travel (caused by Covid) halted refinancing prospects for the aerospace business. Without a viable exit, the Lenders had to hold until capital markets returned.
COVID ultimately reduced annual revenue by 25% and EBITDA by 50%. Company was on trajectory to exhaust cash, impairing Lenders’ 100% recovery.

How We Advised

Developed plan to reduce fixed costs that included closing two facilities and obtaining rent concessions from landlords.
Advised management to ignore customers’ requests to continue to build inventory orders at pre-COVID demand levels, preserving cash. Subsequent workdown of Inventory, adjusting for new revenue run-rate, helped provide cash liquidity.
Established diligent Accounts Receivable monitoring and collections that mitigated an increase in charge-offs and DSO.
Identified pricing issues, made recommendations to improve bidding process and costing methodologies.
Obtained $10 million loan through the Payroll Protection Program.
Negotiated forbearances and attainable amendments to debt service with Lenders.
Periodically tested capital markets, restarted financing initiative when closing amounts could be reasonably attained.
Maintained weekly financial projections and communications with Lenders and Lessors on initiatives and liquidity.
Cost-savings and efficiency initiatives resulted with stabilization of the Aerospace business EBITDA to break-even by year end.
Improvement in working capital generated over $6 million cash liquidity, a lower, and sustainable, cash conversion cycle.
6 months later attracted capital proposals sufficient to payoff 100% bank debt plus provide go-forward liquidity.
The Company closed on its recapitalization with a new 80% owner, repaying the bank debt and injecting the business with sufficient liquidity to endure and rebound.
Equipment lessors, satisfied with liquidity forecasts, consented to continue.
Bank lenders endured twelve months of forbearances (5), progressed from an impaired situation to a full recovery.
Owner avoided a Chapter 11 which would have been personally devastating.

Key Contact

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

Mike Boudreau, CPA, CTP, CFF
Director
Strategic Advisory Practice
+1 248 227 0978
[email protected]

Related Practice Areas

> Operational Performance Improvement
We leverage extensive experience to serve as a partner to organizations to implement the appropriate operational steps to grow their business and create enterprise value. Our experts have diverse backgrounds and are expert problem solvers. We rapidly assess a situation, develop a holistic solution, and execute efficiently with purpose.

> Investor Solutions and Corporate Performance Improvement
We help organizations and investors unlock enterprise value through operational excellence, strategic execution, and informed decision-making. Whether navigating a merger or acquisition, scaling through hypergrowth, or turning around underperforming assets, our experts deliver hands-on, results-driven support across the investment lifecycle.

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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.