Negotiating a Consensual Debt for Equity Conversion

Peoples Education

Saddle Brook, New Jersey

Challenge

School Publisher serving K-12 grades. $10 million sales. $6 million debt.


  • Common Core Curriculum required in 2014, changing testing methods and requirements
  • Recession had reduced funding available at schools
  • Equity no longer willing to provide funding necessary for turnaround
  • Sales had been falling for 5 years with no response from Management Team
  • CEO had been fired and entitlement culture pervaded the organization
  • Senior Lender was requiring control prior to agreeing to provide additional capital to company
  • Vendors extended to fund operations and no ability to fund the $1.5 million in excess payables

Solution

  • MorrisAnderson hired as CRO to negotiate deal with Lender and to reach settlements with vendors
  • Realistic Projections created to determine actual working capital requirements for company to fulfill orders
  • Reorganization of Senior Management Team, reduction in Cadillac benefit plans, right sizing of compensation and creation of measurement tracking systems to analyze results to budget
  • Reorganization of reporting network

Results

  • Secured Lender converted debt to 90% equity and provided funding necessary to continue operations
  • Vendors agreed to a 50% reduction in outstanding payables and a payment plan that started 6 months into the future
  • Company refocused sales and marketing effort on new targets
  • Consolidation of all operations into a single facility to breakdown communication barriers
  • Company reduced monthly burn by $400K and returned to profitability

Joe Compitello

Joe Compitello is a Senior Director at MorrisAnderson. As CRO/CEO of a private, distressed mid-market industrial equipment manufacturer, Joe refinanced senior and sub debt as well as senior and equity funding; implemented organizational restructuring and long term strategic planning; restructured dealer network, manufacturing and support functions; and negotiated the sale of the business to a… Read More