Undisclosed Niche Consumer Products Company

Situation

After the Company failed to make an interest and amortization payment on a term loan with the senior lender, Gordian was engaged to assist in negotiating a recapitalization with the private equity sponsor.

The Company had recently transitioned most of its manufacturing to either Mexico or China. Poor reporting and other challenges during the transition had resulted in fulfillment issues and customers pulling orders. While the Company worked hard to rebuild customer trust, it lacked the liquidity to complete the pivot.  The Company was unable to make its debt service payments and stretched its working capital to a point where the Company was unable to obtain new product to fill orders.

The senior lender agreed to a short forbearance to allow Gordian to conduct diligence on the business plan and develop a restructuring of the Company’s balance sheet that gave it the liquidity and runway it needed to execute on its turnaround plan.

Engagement

The client is a designer and distributor of durable consumer products in the U.S. and Europe and engaged Gordian to help negotiate a recapitalization with the private equity sponsor.

Outcome

Working closely with Management, Gordian spent a month on-site reviewing the reforecast and providing management with input on its development. This included understanding the impact of a planned transition to third party logistics and accurately forecasting the P&L and working capital impact from outsourcing manufacturing and production to China.

Gordian then led a restructuring of the balance sheet that included the senior lender investing ~$10mm into the business to provide runway to execute on the turnaround. The lenders were also given warrants to purchase a stake in the Company and provided board seats.

To encourage the sponsor to refinance the debt, the warrants were structured so that if the debt was not taken out by a date certain, the lenders would eventually increase their stake in the Company.