Negotiating a Consensual Debt for Equity Conversion
Peoples Education, Saddle Brook New Jersey
School Publisher serving K-12 grades. $10 million sales. $6 million debt.
- Common Core Curriculum required in 2014, changing testing methods and requirements.
- Recession had reduced funding available at schools.
- Equity no longer willing to provide funding necessary for turnaround.
- Sales had been falling for 5 years with no response from Management Team.
- CEO had been fired and entitlement culture pervaded the organization.
- Senior Lender was requiring control prior to agreeing to provide additional capital to company.
- Vendors extended to fund operations and no ability to fund the $1.5 million in excess payables.
- MorrisAnderson hired as CRO to negotiate deal with Lender and to reach settlements with vendors.
- Realistic Projections created to determine actual working capital requirements for company to fulfill orders.
- Reorganization of Senior Management Team, reduction in Cadillac benefit plans, right sizing of compensation and creation of measurement tracking systems to analyze results to budget.
- Reorganization of reporting network.
- Secured Lender converted debt to 90% equity and provided funding necessary to continue operations.
- Vendors agreed to a 50% reduction in outstanding payables and a payment plan that started 6 months into the future.
- Company refocused sales and marketing effort on new targets.
- Consolidation of all operations into a single facility to breakdown communication barriers.
- Company reduced monthly burn by $400K and returned to profitability.