Case Studies

Reducing Lender Exposure to a Troubled Company

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

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Home·Reducing Lender Exposure to a Troubled Company

The Situation

Convenience store chain and bulk fuel distributor with slot machines in the C-stores. $650 million sales. Secured debt in excess of $250 million. 21 secured lenders. Locations across 3 states and Las Vegas. 135 locations.

  • The company operates 135 gas station/convenience stores in California, Arizona and Nevada, with a concentration in Las Vegas. The company maintains gambling machines in many of these locations. The company was over leveraged and faced liquidity problems with key creditors, vendors and taxing authorities.
  • There are 21 secured lenders providing financing to the company, including banks. The total debt was $253 million with an annual debt service of $32.4 million. The top 3 banks accounted for 50.3% of the debt.
  • Properties are owned by family LLC’s, trusts, third parity entities and development companies.
  • To prepare an analysis on the performance of THI stations and C-stores pledged as collateral to Bank.

How We Advised

  • Developed operating metrics based on OPIS (Oil and Petroleum Institute Study) for the C-stores, lubes and car washes.
  • The metrics include: Gas sales, store sales, gross profit, net profit, gallons sold, WAM ( weighted average margin), gas gross profit, C-store gross profit.
  • Modified loan covenants by creating performance percentiles for the stores based upon EBITDA -motivating the sale and/or closure of underperforming stores.
  • Monthly review of the each stores profit and loss statement based upon metrics, annual budget and prior years performance. Classified stores by geographic location and economic trends for possible sale.
  • Three stores have been sold or entered into sale-leaseback agreements.
  • C-store lease payments (rent) have been reduced year over year and non-related expenses have been eliminated.
  • Excess working capital has been applied to the Bank loan and tax authorities have been paid current.

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.

Key Contact

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