Cost Reductions Allow Refinancing

Sandy Alexander

Clifton, New Jersey

Challenge

High-end Commercial Web and Sheet Printer specializing in the cosmetics and pharmaceutical industry. $80 million in annual revenues. $46 million in debt. Two plants in two states.


  • Company was caught in the severe economic decline impacting most of its main lines of business.
  • Revenue had fallen from $140 million to $80 million and was poised for more decline as consumer product demand continued to drop
  • Original equity was out of the money.
  • Rescue capital of $15 million, put in just 9 months earlier from mezzanine lender, was out of the money.
  • Lender group was facing a material loss on its position.
  • Sales management, who had lost its equity and controlled the customer accounts, was threatening to take their accounts elsewhere.

Solution

  • MorrisAnderson retained to assess the viability of the business plan because prior Fortune 100 consultancy firm could not determine the business risk to the satisfaction of the lenders.
  • Prepared comprehensive business plan assessment and operational and financial review of core business model and the assumptions driving projections.
  • Identified scenarios under which the lender could provide support for the company by assessing the risk and cooperation attendant among the stakeholders.
  • Devised exit scenarios and operating scenarios the company could work with to mitigate the lender’s risk.

Results

  • Company’s long term business plan valid through a series of detailed analyses conducted by the MorrisAnderson team.
  • Cost reductions of $4 million identified and integrated into the business plan to improve financial strength and viability.
  • MorrisAnderson recommended that the risk of further failure was too high for the Lender’s risk tolerance.
  • Plan for exiting the credit that was favorable for the lender and kept the company intact and viable for shareholders.
  • Lender group exited within 3 months.