Undisclosed PE-backed Value-added Manufacturer

Situation

Sponsor acquired the Company in 2012 for cash and $180mm in financing from a consortium of lenders (the “Lenders”).

Prior to Gordian’s engagement, the Company faced a combination of external headwinds and operational challenges that resulted in EBITDA declining by 80% over a several year period. This drop in earnings led to a severe liquidity crisis and forced the Company to approach the Lenders about restructuring options in order to avoid a meltdown.

The Lenders’ initial proposal to the Company reflected their view that they were the fulcrum security and therefore “owned the Company.” The Lender proposal contemplated taking control of the Company, leaving the equity holders with a small stake, which the Lenders described as a “tip”.

Engagement

Gordian was engaged by The Company, a privately owned value-added manufacturer.

Outcome

Gordian (working with Counsel and the Company) obtained a restructuring that benefited all parties by positioning the Company to execute a turnaround and grow EBITDA, and we achieved this less than a month after negotiations began:

• Face amount of secured debt was reduced by ~60%, with multi-year covenant relief and a 50% reduction in debt service through maturity.
• Sponsor and the Lenders together funded a new preferred / delayed draw structure to provide both immediate liquidity and additional commitments, if later needed.
• The Lenders received a small amount of equity, leaving the Sponsors (together with other Old Equity) holding a super majority of the Company post-restructuring.
• Valued Management team received a new equity incentive plan to align interests.

Gordian used the looming liquidity crisis and other levers to “encourage” the Lenders to agree expeditiously to a sponsor-friendly deal. We accomplished this by demonstrating to the Lenders that the outcome achieved above was far preferable to the more draconian alternatives that Gordian recommended to the Company to be implemented if circumstances dictated.