Case Studies

Bankruptcy Advisory & Operational Turnaround for Network Solutions Company

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

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Home·Bankruptcy Advisory & Operational Turnaround for Network Solutions Company

The Situation

Reseller of voice and data services to the middle market. $130 million in annual sales. $48 million bank debt.

  • The Company was insolvent and losing $(6) million of EBITDA.
  • Over $300 million in total secured and unsecured liabilities.
  • Declining revenues of $120 million and burning cash at an alarming rate.
  • Excess industry capacity is squeezing profit margins.
  • Bank debt is clearly impaired, with Senior Lenders pressuring the Company to sell out to a major vendor via a 363 sale.
  • Lenders are prepared to provide DIP financing in exchange for the sale.

How We Advised

Our team was retained as CRO and, after an independent assessment, determined that this transaction was not in the best interest of all stakeholders as it did not maximize their potential value. Additionally, we determined that there was a high risk that the potential stalking-horse bidder would be unable to close the deal.

  • Presented a turnaround plan to secure bank lenders whereby a slight increase in new capital would allow them to lower their losses, per projections, vs. what the stalking horse bidder was likely to do in lieu of executing a sale.
  • The bank debt was approximately $48 million, and after reviewing the Turnaround Plan, the Lenders agreed to increase it to $60 million.
  • Filed a planned and consensual Chapter 11 with DIP financing from the secured pre-petition bank lenders and no stalking horse bidder.
  • Changed the business model to focus on higher profit services and to eliminate millions in cost structure.
  • Developed and negotiated a Plan of Reorganization that ended up compromising non-productive liabilities such that the controlling shareholder maintained his pre-petition equity ownership post confirmation without additional capital investment.
  • Secured lenders provided the exit financing and recovered all their investment, plus significant fees, about 15 months post-confirmation, a result that the bank lenders and pre-petition equity had not anticipated.

Related Practice Areas

> Bankruptcy Advisory 
Navigating bankruptcy is inherently complex, often involving struggling businesses, litigation, incomplete or inaccurate financial records, potential fraud, and other challenges, in addition to strict court-mandated processes. Our experienced team of turnaround and restructuring experts seamlessly guides clients throughout the process to optimize outcomes for lenders, creditors, shareholders, and employees. 

 

> Chief Restructuring Officer (CRO) and Interim Management Services 
Our experienced C-suite interim executives advise and support companies in financial distress, experiencing hypergrowth, or that are challenged by critical vacancies among senior leadership. Whether the leadership void results from operating challenges, a recent officer resignation, the need for added support during busy periods, or during an extended job search for the right permanent hire, our experienced executives provide immediate relief and value. 

Key Contact

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

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