Case Studies

Negotiating a Consensual Debt for Equity Conversion

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Home·Negotiating a Consensual Debt for Equity Conversion

The Situation

A School Publisher serving K-12 grades. $10 million sales. $6 million debt.

  • The Common Core Curriculum was required in 2014, changing testing methods and requirements.
  • The recession had reduced funding available at schools.
  • Equity is no longer willing to provide the funding necessary for the turnaround.
  • Sales had been falling for 5 years with no response from the Management Team.
  • The CEO had been fired, and an entitlement culture pervaded the organization.
  • The Senior Lender was requiring control prior to agreeing to provide additional capital to the company.
  • Vendors extended to fund operations, and no ability to fund the $1.5 million in excess payables.

How We Advised

Our experts were hired as CRO to negotiate a deal with the Lender and to reach settlements with vendors.

  • Realistic Projections were created to determine the actual working capital requirements for the company to fulfill orders.
  • Reorganization of Senior Management Team, reduction in Cadillac benefit plans, right-sizing of compensation, and creation of measurement tracking systems to analyze results against the budget.
  • Reorganization of the reporting network.
  • Secured Lender converted debt to 90% equity and provided funding necessary to continue operations.
  • Vendors agreed to a 50% reduction in outstanding payables and a payment plan that started 6 months into the future.
  • The Company refocused sales and marketing efforts on new targets.
  • Consolidation of all operations into a single facility to break down communication barriers.
  • The Company reduced monthly burn by $400K and returned to profitability.

Key Contact

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

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