Bankrupt Company Sale Nets $21 Million for Owner

Aerospace & DefenseFiduciary ServicesLitigation SupportTurnarounds & Restructuring

60M

Annual Sales

15M

in Debt

Hitchcock Industries, Bloomington Minnesota

Challenge

$60 million annual revenue commercial aviation component manufacturer (highly engineered aluminum and magnesium castings). $1-2 million annual EBITDA barely covered debt service on $15 million of debt. 70-year old company, third generation family-owned with one plant, and 250 employees.

  • Aviation industry collapsed post 9/11.
  • The Company misreported AR on its borrowing base, the cash flow barely supported debt service; six months after a refinancing the company was shut down due to uncertainty of outcome.
  • Information was on two systems due to an incomplete system implementation.
  • Finance and accounting departments were weak and relatively new to the company.
  • The OLV of assets suggested a loss for the lenders; key suppliers funded a DIP loan because the parts were critical.

Solution

  • Worked with management MorrisAnderson to craft a business plan that downsized revenue and improved pro forma EBITDA to $5.5
    million.
  • MorrisAnderson marketed the Company as part of a section 363 sale process.

Results

  • The successful marketing of the company produced seven purchase LOIs and four refinance LOIs.
  • The stalking horse bid of $30 million provided $5 million to equity; equity received $21 million of value from the final bid at auction of $46
    million.
  • All liabilities, including the bank debt, were paid in full.

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