Reducing Lender Exposure to a Troubled Company
Terrible Herbst, Las Vegas Nevada
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.
- 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.
- 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.