Gordian acted as financial advisor to a Sponsor-backed industry leader that provides marketing and other services to an industry indirectly related to the events sector. Within several months, Gordian effected a consensual, out-of-court restructuring that resulted in a significantly delevered balance sheet, additional capital to stabilize the business, several-year debt service and covenant relief and the retention of control by the Sponsor.
Case Study
Undisclosed PE-Backed Marketing Services Company
CLIENT: Undisclosed PE-Backed Marketing Services Company Case Study
Services
Restructuring & Debt AdvisorySituation
With the outbreak of COVID-19 pandemic, the Company’s markets faced widespread disruption in activity, rendering the Company unable to conduct its normal business operations. The Company experienced a significant loss of revenue and projected that it would not generate any positive free cash flow over the next two years. As a result, the Company found itself with approximately $150 million of debt and preferred and a now overleveraged balance sheet, limited operating flexibility, depleting liquidity and in default with its Lenders.
Gordian quickly identified and analyzed the capital structure options available to the Company and the relative merits of such options, including the credibility of – and leverage created by – certain non-consensual alternatives. Following this initial period, Gordian worked closely with the Company and counsel (Kirkland & Ellis) to develop a credible negotiating strategy, and despite the Lender groups trying to present a united front, we were able to divide and conquer, negotiating first with the senior Banks to create pressure on the junior Lenders – who were at odds with the Sponsor over economic splits and governance control.
Engagement
Gordian was engaged by a Sponsor-backed industry leader that provides marketing and other services to an industry indirectly related to the events sector.
Outcome
Following several months of negotiations, a consensual restructuring was ultimately negotiated, with 100% of the critical stakeholders, that avoided a bankruptcy.
The transaction resulted in a restructured balance sheet that (i) significantly reduced debt through the elimination of all junior debt and preferred equity (i.e., more than 1/3rd of all obligations senior to the Sponsor), (ii) extended out the maturity date of the debt, (iii) eliminated cash debt service for as much as 3+ years through the use of a “springing interest” construct (click here for details), (iv) eliminated or otherwise favorably reset financial covenants, (v) raised additional equity capital and (vi) put in place a strong Management Incentive Plan – all while allowing Sponsor to maintain majority ownership and governance control.