The Turnaround
Burke Capital Corporation (BCC) was recently hired to help a troubled consumer products company reeling from three years of declining sales, increasing losses, negative net worth and a huge over-advance of its bank line. Coupled with very frustrated bankers and trade creditors, a key question was how could Burke help its client avoid a Chapter 11 bankruptcy?
In less than 18 months Burke Capital cured the bank facility, paid off 100% of the trade debt and produced record-breaking revenue and profitability.
In our first visit, we found a company in dire straits: out of cash, unable to buy materials, in violation of its bank covenants and its credit line frozen. Thankfully, management was willing to accept counsel as well as put in the hard work necessary to fix the business. And they wisely tapped into three service offerings from Burke Capital, including:
- Corporate Rescue. Crisis & Cash Management, Restructuring, Turnarounds, Insolvency
- Growth Management. Strategy, Revenue and Profitability Accretion, Capital Formation
- Value Drivers & Exit Planning. Governance, Succession Planning, Mergers and Acquisitions
It was clear from the start that the business was heading to liquidation. A Chapter 11 bankruptcy would have been better, but was still too costly, cumbersome and surrounded with negatives. The initial Burke Capital goal therefore, was to immediately surface a better option.
Assessment: BCC immediately implemented its 13 Week Cash Management Regimen™ which resulted in a 25% reduction in monthly operating expense and a positive cash flow for the first time in ages. Our guidance also helped secure both rent and headcount reductions as well as the realignment of senior staff around a new, more appropriate strategic plan.
Voluntary Out-of-Court Restructure: In order to secure creditor cooperation, we called a public meeting of unsecured creditors, presented the current business situation and their options. We requested a 90-day moratorium on AP payments. Their agreement allowed us to stabilize cash flow, develop a comprehensive plan and implement cost reductions. The “time-out,” also allowed us to enhance company credibility through more accurate, timely financial reporting, achieve profitability and rebuild the sales backlog. We additionally created a voluntary Workout Agreement which provided creditors an acceptable recovery plan: payment in full, over time based on the company’s free cash flow.
Update: The management team, supported by Burke Capital advisory and hands-on interim leadership, is now generating record earnings. The balance of unsecured debt has been paid in full. All within 18 months. If you’d like to see summarized Pre-Burke Capital/Post-Burke Capital financial statements, drop us an email. We are happy to send the numbers side of this turnaround story your way.
The Burke Capital team of highly experienced professionals focus on two things: fixing troubled companies and generating profitable, sustainable growth. Opportunities to engage company principals are limited, so it is important to act decisively. A quick phone call or email can unleash the power of Burke Capital and its Integrated Expert Network (IEN™) for your organization.
