Negotiating a Debt Restructuring and Refinancing

Jewish Community Center

St. Louis, Missouri

Challenge

Multi-location community centers. $25 million sales. $58 million debt incurred to build state of the art facility and to refurbish existing facilities.


  • Donations and returns on investments in endowments (primary source of repayment) had fallen significantly below projections
  • 10 donors accounted for more than 90% of the capital raising capacity
  • Incurred debt to build/refurbish facilities with plan for continued donations and investments in endowments
  • Recession resulted in a declining trend that underachieved projections for operating revenues, donations, and loss of principal endowments; the decline in interest rates resulted in lower returns on remaining investments
  • Senior lender filed lawsuit after default on payment and unsuccessful attempts to discuss restructuring the debt
  • Structure of debt was multi-faceted: line of credit, bonds, interest rate swap agreement and letter of credit
  • Additional factors more unique to non-profits: significance reliance on cash from donors; inherent absence of equity owners; major donors impact the situation and solutions

Solution

  • Ensured management was teamed with financial, legal, and public relations advisors to consider all options
  • Ensured restricted assets were appropriately and distinctly separated from unrestricted assets
  • Developed long-term cash flow forecast to illustrate feasibility of options with management, key donors, and lender
  • In each scenario, ensured all stakeholders were identified and roles/impact were considered
  • Led negotiations with the lender, obtained stand-still on litigation while negotiations continued in good faith
  • Provided assessment of the situation along with options and recommendations for attainable solutions
  • Ensured the Board was informed and major donors were actively engaged in exploration of scenarios

Results

  • An out-of-court resolution was devised that was satisfactory to the lender and the client
  • The debt was restructured so as to allow the lender to exit the debt
  • All of the facilities and services continued uninterrupted during this process
  • Secured lender recovered $45 million of $58 million, significantly above lender valuation
  • Client paid majority of settlement in cash due to secondary fundraising campaign and new bank loan

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

Daniel Wiggins

Daniel Wiggins is a Managing Director at MorrisAnderson with notable turnaround and transaction experience. In building value for his clients Daniel focuses on enhancing stakeholder relationships that optimize business continuity and he frequently leads negotiations with clients’ key suppliers, customers, and lenders – particularly during restructuring initiatives. An additional focus of Daniel’s engagements is mentoring… Read More