Case Study

Undisclosed Home Improvement Company

CLIENT: Undisclosed Home Improvement Company

Gordian offered credible and powerful alternative strategies to the Company and advised on obtaining a forbearance for the Company to even the playing field and further negotiations with the lender.

Situation

The Company saw two significant forces impact the business in the years following COVID: a weakening home improvement market, and a lack of clear marketing and spending strategies within the Company. The sponsor installed a new management team and financed an acquisition that would result in significant cost savings long term, but the Company nevertheless found itself in covenant default and facing liquidity pressure.

To that end, the Company had been negotiating a global restructuring for a few months in late 2023 with its significant lender who was owed about $100 million.

Gordian was engaged at a pivotal time when the Company was continuing negotiations but was unsure whether a satisfactory deal would come to fruition. Gordian took the initiative to develop a plan of strategic alternatives for the lender absent a consensual deal.

Engagement

The Company is a private equity, Sponsor-backed D2C Services company specializing in repair and remodeling for residential homes. Gordian had previously successfully restructured another portfolio company of the Sponsor. When acquired through a leveraged buyout, the Company was generating EBITDA of ~$25 million. The Company excelled during COVID to reach a peak EBITDA of ~$35 million. However, in the years following, the Company’s market began to decline drastically, leading to a TTM EBITDA of ~$10 million by the time Gordian was engaged.

Outcome

Using our traditional “carrot and stick” approach (i.e. leveraging our unique lack of conflicts with creditors to create credible scenarios that the Lenders would dislike and fear), Gordian quickly worked with the lawyers and sponsor to develop a plan of attack should a consensual deal with the lender not be met.

Significantly, Gordian advised as to how to get a 30 day forbearance for the Company, which had been in default for months; this enabled a more even-handed restructuring discussion with the lender and was pivotal in achieving consensus.

At the end of the year, the Company was able to reach a consensus with the lender without having to employ Gordian’s alternative and much less preferred strategies, with the sponsor infusing new equity in exchange for covenant relief for the next 12 months, a PIK option on the outstanding debt, and lower minimum liquidity requirements plus cure rights.