Reducing Inventory Allows for Large Refinancing

Challenge

$600 million distributor of frozen seafood. Separate lobster procurement and processing operations on East Coast. $175 million bank syndicate loan.


  • Company financial performance dropped from EBITDA of $25 million/year to $2 million/year as result of large inventory losses when frozen shrimp pricing dropped and losses on start-up lobster processing facility.
  • Company had bloated inventory position with turns at 3X/year and almost $10 million of aged ineligibles.
  • Losses on lobster processing operation were $4 million/year and could only be cut to loss of $2 million/year.
  • Loan was a bank loan and company leverage was 5X under best case projections, so regulated bank lenders had to exit.

Solution

  • Inventory needed to be reduced.
  • Aged inventory needed to be sold.
  • Money losing lobster production needed to be shutdown.
  • Cash had to be managed to a borrowing base formula.
  • Loan needed to be refinanced to an asset-based facility.
  • 10-member bank group needed to be kept informed and supportive during the process.

Results

  • Inventory was cut by $25 million (over 20%) over 9 months.
  • Aged inventory was sold and reduced from $10 million to $2 million.
  • Money losing lobster processing operation was shut down.
  • Company was refinanced to an Asset-Based Lender.

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