Reducing Lender Exposure to a Troubled Company

Terrible Herbst

Las Vegas, Nevada

Challenge

Convenience store chain and bulk fuel distributor with slot machines in the C-stores. $650 million sales. Secured debt in excess of $250 million. 21 secured lenders. Locations across 3 states and Las Vegas. 135 locations.


  • The company operates 135 gas station/convenience stores in California, Arizona and Nevada, with a concentration in Las Vegas. The company maintains gambling machines in many of these locations. The company was over leveraged and faced liquidity problems with key creditors, vendors and taxing authorities.
  • There are 21 secured lenders providing financing to the company, including banks. The total debt was $253 million with an annual debt service of $32.4 million. The top 3 banks accounted for 50.3% of the debt.
  • Properties are owned by family LLC’s, trusts, third parity entities and development companies.
  • To prepare an analysis on the performance of THI stations and C-stores pledged as collateral to Bank.

Solution

  • Developed operating metrics based on OPIS (Oil and Petroleum Institute Study) for the C-stores, lubes and car washes.
  • The metrics include: Gas sales, store sales, gross profit, net profit, gallons sold, WAM ( weighted average margin), gas gross profit, C-store gross profit.
  • Modified loan covenants by creating performance percentiles for the stores based upon EBITDA -motivating the sale and/or closure of underperforming stores.
  • Monthly review of the each stores profit and loss statement based upon metrics, annual budget and prior years performance. Classified stores by geographic location and economic trends for possible sale.

Results

  • Three stores have been sold or entered into sale leaseback agreements.
  • C-store lease payments (rent) have been reduced year over year and non-related expenses have been eliminated.
  • Excess working capital has been applied to the Bank loan and tax authorities have been paid current.

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