Case Studies

Planned Liquidation Converts to Highly Profitable Turnaround of Midwestern Paper Mill

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

Read More close Created with Sketch.
Home·Planned Liquidation Converts to Highly Profitable Turnaround of Midwestern Paper Mill

The Situation

Midwest Paper Mill with 3 processing lines. $250 million annual sales. EBITDA ($10) million.

  • The company was totally shut down and in a state court receivership due to lender defaults and insolvency. There were significant cash flow losses, an unfunded $60 million pension liability, nonaccrual debt, and declining sales.
  • The company produced commodity-grade white paper in an industry that was rapidly declining, had excess labor costs, an unfavorable collective bargaining agreement, rising raw material costs, and unsustainable operating costs.
  • The Receiver was forcing a quick sale, leaving little time for detailed due diligence.
  • Potential buyers estimated the capital costs and equipment upgrades needed to convert the facility to a more profitable brown fiber operation to exceed $35 million and would take 2 to 3 years to implement.
  • The Buyer’s intent was to liquidate the business.

How We Advised

Our experts worked for the buyer and presented an offer of $21.5 million that included working with the Receiver over 90 days to allow the buyer and our team to evaluate a startup and transition plan to brown paper.

  • Evaluated available options and convinced the Buyer to forgo a quick $5 million gain on liquidation and reinvest its purchase price and $10 million more to fund a Turnaround Plan with the goal of converting the plant from less profitable white paper to the growing brown paper segment of the booming packaging industry.
  • Successfully negotiated with the union on a new, lower-cost collective bargaining agreement and staged employee hiring.
  • Restarted operations with a few employees to run out inventory, ran brown paper tests for conversion, worked with outside brokers to establish raw material buys and brown paper customers, collected outstanding receivables, and evaluated management.
  • Converted 2 of 3 production lines to brown paper production.
  • Took a liquidation project and changed the owner’s strategy to a turnaround.
  • Brought back only key workers initially, negotiated a new union agreement, and established a brown paper processing plant conversion plan.
  • Now employs over 200 full-time employees
  • Completed conversion of equipment for $15 million and transitioned operation to a brown paper maker in 6 months; one-half the cost and one-fourth the time estimated by paper industry experts.
  • What once was a money-losing operation is now generating in excess of $20 million in annual EBITDA for a $30 million investment.

Key Contact

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

Related Practice Areas

> 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. 

 

> 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. 

Our Experts