Resizing Company Leads to Refinancing
KingKutter, Winfield Alabama
Manufacturer of Rotary Mowers and Farm Equipment with revenues of approximately $50 million. $16 million debt.
- Projected cost savings did not materialize as recession caused drop in revenue and profitability
- In addition, ownership and control issues caused further liquidity strains
- Company had lost almost 20% of its revenue as a result of the Great Recession and a key customer revenue decline.
- Margins at lower revenue levels could not support fixed operating and manufacturing costs.
- Cost cutting efforts fell short of achieving profitable operations.
- Company faced a significant crossroads as it was also engaged in an ownership struggle between father and son.
- Bank was pressuring company to find a new lender.
- MorrisAnderson (MA) quickly analyzed the macro, micro and Company’s situation to conclude that:
- While the company initially reacted slowly to the economic downturn, it had since appropriately right-sized operations
- Company had a sound business model.
- Company had a focused sales effort and product strategy that was strategically sound and should yield strong results.
- MA reviewed Company forecast assumptions for reasonableness – flowed them through an integrated model which showed that cash flow and availability would be sufficient to fund operations and service bank debt.
- MA worked with senior management to resolve ownership issues and formalize management succession plans, which were critical to business continuity.
- MA’s validation of the business plan and cash projections gave the lender comfort to allow the company adequate time to seek refinancing.
- The Company was able to refinance its existing debt.
- The lender was paid in full.