Case Studies
J.S. Held Acquires Shechter & Everett to Expand Forensic Accounting Capabilities for Family Law Disputes in Florida
Read MoreThe client was one of the world’s leading providers of Satellite Communications and Information Technology (“IT”) Services to the commercial maritime industry worldwide. The Company provides its customers with integrated turnkey solutions, from the delivery and installation of equipment hardware to a full suite of voice, messaging, and data communications services packaged with software applications tailored for the requirements of ships and their crew, and the support and administrative services required to maintain operations at peak level. The Company serves more than 550 ship operators and provides services to more than 8,000 ships, principally in the commercial cargo sector of the shipping industry, utilizing its own direct sales force and its own worldwide installation and service network. Approximately 90% of its customers are international.
For many years, the Company provided short-burst messaging communications over its digital high frequency (“HF”) radio network, using this network to help minimize what might otherwise be more expensive satellite airtime. With the availability of more efficient Internet Protocol (“IP”) connectivity over satellite, management determined that this service could now be offered cost-effectively using customers’ satellite terminals. The significantly high fixed “carrying costs” (networking costs, leases, power, communications, and labor) associated with servicing and maintaining the “legacy” HF radio network resulted in management making the strategic decision to withdraw from and completely wind down the HF business. In addition to the high fixed “carrying costs” associated with the HF business ($4.8 million and $3.0 million in prior year periods), the Company continued to absorb high equipment costs (CAPEX) as it transitioned customers from certain ‘legacy’ equipment to more up-to-date technology. These issues contributed to the Company losing money (on both a “GAAP” and “cash” basis) in prior year periods. In addition, the Company was unsuccessful in refinancing its debt with an asset-based lender who struggled with, among other things, the Company’s historical net losses, its customer base (90% international), and the timing throughout the month of the Company’s significant monthly unbilled revenue, more than 50% of sales are generated once a month via monthly satellite airtime invoicing (similar to a cell phone provider billing retail customers once a month for cell phone plan/usage). Given the complexity of the Company’s turnaround plan, the asset-based lender suggested that the Company engage an outside financial advisor to assist the Company with the overall refinancing process.
Our experts were engaged by the Company as a restructuring financial advisor to secure a new senior credit facility consisting of a revolving line of credit and a term loan secured by real estate. We took immediate control of the refinancing process. Our team spearheaded the effort, working closely with the Company’s management and its lawyers to prepare a Financing Memorandum that detailed the business, current situation, and the Company’s financial performance. We compiled a detailed, clear, and concise financial package that the prospective asset-based lender could easily review and then present to its credit committee for approval. In collaboration with management, our experts also developed new GAAP projections to enable the Company to both project and validate opening availability with the required minimum collateral requirements, provide the Company with the financial model to operate under the reporting requirements of the proposed new senior credit facility, including the weekly reporting of unbilled accounts receivable, and demonstrate adequate availability on a going forward basis.
Despite the Company’s continued losses, our team’s efforts resulted in the Company completing a $15.8 million transaction that successfully refinanced its senior debt. The transaction consisted of a new $15 million Revolving Credit Facility with Wells Fargo Capital Finance secured by the Company’s receivables and inventory, and a new $839k Term Loan from Wells Fargo Capital Finance secured by the Company’s real estate.
This complex refinancing provided the Company with substantial new working capital and availability at closing. In addition to addressing the Company’s current and future working capital needs, we helped enhance and preserve the Company's value, better positioning it for future growth.
Brian F. Gleason, CTP
Senior Managing Director
Strategic Advisory Practice
+1 610 659 8118
[email protected]
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