PE Backed Basic Industries Supplier

Situation

The Supplier’s business suffered beginning in 2012 because of declining market fundamentals, particularly in the US, a region where the supplier had historically derived over half its revenue. Expectations for enhanced safety requirements in new markets (primarily in Asia/Africa) also did not materialize, further exacerbating weak financial performance. The Company’s performance is highly cyclical as US industry regulations required certain safety products be replaced every five years, causing large swings in financial performance.

When Gordian was engaged, 2016 EBITDA was break even on $60 million in revenues. Total debt was $100mm (including $50mm of first-lien and $45mm of second-lien)  and the Company was forecast to both be in violation of its financial covenants and exhaust its liquidity in months despite contributions by both the sponsor and second-lien lenders.

Gordian was engaged to effect a financial restructuring that provided the Company liquidity and runway to effectuate a turnaround and bridge through 2018 when US safety regulation purchases were expected to drive meaningfully positive financial performance.

Engagement

The Company is a privately held supplier that designs and sells industrial safety equipment globally.  The Company historically had 50% or greater (including as high as 90%) market share in all its major product lines. Gordian Group was engaged as investment banker to the Company in connection with their financial restructuring.

Outcome

Gordian engaged with the second-lien lenders and executed a transaction that involved the second-lien lenders’ purchase of the first-lien lenders’ position. The restructuring provided the Company with additional liquidity, reduced the Company’s debt load by $30 million, eliminated covenants for 12 months, and reduced annual debt service levels by over $6 million to provide the liquidity and covenant buffer it needed. A new management incentive plan was also established and pre-restructuring securityholders were given a preferred note and an equity recovery.

Gordian also delivered a fairness opinion in connection with the transaction.