Franchisor Works Down Credit Exposure and Allows Company Refinancing

Great Lakes Ace

Farmington Hills, Michigan

Challenge

$100 million retailer franchisee of home improvement and garden products with approximately 50 stores throughout the Detroit metro area. $15 million debt.


  • Company previously operated a chain of 65+ stores under an independent name selling low-cost home improvement and garden products throughout the Detroit metro area
  • Company began reformatting all of its locations as Ace Hardware locations, and re-opened almost 50 locations
  • Distribution was also shifted from a centralized warehouse to a direct-to-store shipment model
  • Conversion was to be funded by liquidation sales, but an unfavorable contract with the liquidators resulted in the company being significantly short on the funds necessary to complete the store conversions
  • Additional funding was generated by not paying for Ace merchandise shipped to new stores, resulting in a significant unsecured trade obligation to product supplier Ace Corporate beyond the bank debt

Solution

  • MorrisAnderson did an independent assessment of business operations and sales and earnings forecasts to evaluate whether company was viable and could pay down its trade debt while staying within constraints of its ABL loan
  • Determination of management strength and whether key personnel would be able to successfully execute the operational turnaround and store conversion plans
  • Ace provided operating consultants to assist with remaining transitions and store performance improvement initiatives; additional inventory investment was necessary to complete conversion
  • Complete sale of now unneeded warehouse facility to reduce debt

Results

  • Assessment confirmed that ACE Corporate should continue to support Company and its continued operational improvements
  • ABL loan was refinanced based upon quality of inventory, support by ACE Corporate and improving EBITDA

Daniel F. Dooley

Dan Dooley, CTP, is a Principal and CEO at MorrisAnderson based out of Chicago. He has a strong national reputation in crisis management, operations improvement, debt refinancing/restructuring and C-level positions. He is a frequent speaker at industry conferences and a regular author for industry periodicals. Dan has served on the Board of Directors of both… Read More