Reducing Inventory Allows for Refinancing for Agriculture Distributor

OPF (Ottawa Plant Food)

Ottawa, Illinois

Challenge

$90 million Revenue. Agriculture Chemical & Feed Distributor. $20 million Secured Debt.


  • Company decided to ramp up operations while a drop in commodity prices had yet to hit bottom, ultimately causing large losses two years in a row.
  • Agriculture commodity prices dropped causing a ripple effect to the suppliers of chemicals and feed.
  • Large chemical manufacturing companies merged, further causing prices to drop by as much as 25%.
  • The company doubled down on their inventory position in the middle of the turmoil causing large losses two years in a row.
  • Poor accounting and financial disciplines causing a large disconnect between operations and finance team.
  • Seasonal business with liquidity shortage during the late summer and fall season.
  • Heavily reliant upon manufacture rebates to fund off-season liquidity shortage.
  • ABL lender wanted to be refinanced prior to the beginning of the next season.

Solution

  • Excess inventory returned to manufacturers to reduce outstanding payables.
  • Aged inventory liquidated to provide additional liquidity for paydown of the secured debt.
  • New accounting system implementation to better track and manage manufacturer rebates.
  • New policies and procedures established between operations and finance to better manage the business.
  • Exit non-profitable manufacturer rebate programs.

Results

  • Inventory reduced by $13 million/60% to satisfy vendor payables and covenant compliance with ABL lender.
  • Exited several non-profitable manufacturer rebate programs and negotiated higher rebates from long-standing suppliers.
  • Implemented new accounting system to better track profitability and manage rebates.
  • Refinanced $20 million ABL loan to a new lender.

 

Howard R. Korenthal

Howard R. Korenthal is a Principal and Chief Operating Officer at MorrisAnderson. He has over 30 years of experience working with financially distressed and underperforming companies, serving in senior management, interim management and consulting roles. Howard began his career with the Big Eight accounting firm of Coopers & Lybrand in Chicago where, as an audit… Read More