The Company provides specialty welding and machining services, acting as a general or sub-contractor on construction, maintenance and life extension projects.
The Company is an industry leader in the nuclear, fossil fuel, petrochemical, refinery, pharmaceutical, food and beverage, pulp and paper, and high purity industries.
The Company experienced rapid growth due to its superior job performance at a new construction site. The growth in this customer led to a significant concentration, in excess of 80% of sales and accounts receivable. The customer concentration was forecasted to remain at that level for the next 12 months.
In addition, the Company was defrauded by their third-party payroll provider, who failed to remit federal and state payroll taxes. The Company also had a significant tax liability due to findings from a state tangible property audit. These issues resulted in blocks on the borrowing base.
Management retained Fort Dearborn to evaluate its strategies, advise on dealings with its current lender, and to seek a new lending arrangement. With Fort Dearborn’s assistance the Company successfully:
–Entered into a forbearance agreement with the current lender that expanded borrowing availability and provided adequate time to refinance the Company, based on a 13- week cash flow forecast and a revised fiscal financial forecast; additionally, Fort Dearborn negotiated the inclusion of previously excluded collateral in the new borrowing base and reasonable financial covenants;
–Improved cash flow from a major customer;
–Prepared materials and contacted banks and specialty finance companies to obtain a new lender; and
–Received multiple proposals, facilitated lenders due diligence and closed the transaction with a major financial institution within 90 days of executing the forbearance agreement.
Within 3 months of FDP’s engagement with the Company, the Company:
–Developed a forecast and plan to return to positive cash flow from operations;
–Enacted roughly $500,000 in annual net profit improvements, between revenue increases and expense decreases, including payroll reductions;
–Refinanced a portion of its credit facility with a new lender, thereby reducing some exposure from the lead bank; and
–Engaged in discussions with a new lender to refinance its credit facility when the principal came due.