MorrisAnderson Assisting a Lender Reduce its Loan Exposure

Challenge

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120 location, 6,400 bed Assisted Living Centers. $200 million annual revenues. $190 million in debt.

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• Illinois budget problems resulted in Medicare reimbursements being cut off state-wide
• 35% of company receipts aging past 120 days with no indication of timing on resumption of payments from the state
• Facing tremendous budget shortfalls, Illinois limited Medicare reimbursements and extended payments 120-150 days
• AR was growing over $1 million each month and AP was being stretched a similar amount to maintain liquidity
• Company was being run in 13 different silos representing various acquisitions. Fragmented corporate structure; intercompany transfers involved due to/due from the controlling shareholder
• Certain silos paying AP down to near zero days, others extending credit past 120 days. No coherent management strategy to address situation

Solution

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• MorrisAnderson was hired by bank group to review collateral situation and assess company’s management and their plans to address issues
• Analysis identified additional personal collateral of controlling shareholder
• Reviewed overall company financial situation; regarding refinancing options, collateral valuations and cash flow of operations
• Prepared assessment of bank documents, collateral positions and developed options for bank group as part of refinancing process

Results

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• Bank exposure reduced from $25 million to $5 million as part of refinancing
• Additional collateral from primary shareholder identified, turned into cash and used to provide liquidity for entities
• MorrisAndersonstill providing quarterly monitoring for bank group to ensure compliance with covenants and to identify ongoing operational issues