Turnaround Allows Lender to Amend Loan

ETX

Alma, Michigan

Challenge

Automotive aftermarket transmissions and torque converters. $94 million. $31 million debt. Private Equity ownership.


  • Contracts lost due to lack of focus on sales in traditionally stable businesses led to systemic underperformance on bottom line.
  • Management could not cut cost fast enough to maintain liquidity.
  • Company modestly leveraged, but working capital was scarce in an inventory intense business.
  • Three divisions were draining cash from one good division.

Solution

  • MorrisAnderson engaged by Private Equity firm to assess viability of business and determine options to create value.
  • MorrisAnderson developed a multi-stage process to overhaul the company:
  • Sell off unprofitable transmission rebuilding facility.
  • Consolidate transmission facility into the contract manufacturing facility where there was excess space.
  • Make overhead cuts and consolidate Texas location.
  • Reduce unprofitable retail locations for the vertically integrated torque converter division.

Results

  • Company realized $3.2 million in cost cuts.
  • Working capital was improved by $5 million through the sale of the unprofitable division.
  • Private Equity sponsor contributed $1 million to satisfy lender request.
  • Lender renewed its relationship with the restructured company.

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