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Case Study: Furniture Manufacturer and Retailer

Business Plan Review & Assessment, Financial Restructuring, Evaluation of Management

Company: $320 million furniture manufacturer and retailer

Situation/ Tasks Performed: The Company incurred high debt levels through the acquisition of manufacturing companies, a retail chain, and the construction of a new facility. Poor performance in the acquired companies, as well as the new facility, led to operating losses and the closure of one of the manufacturing companies at a substantial loss. The losses resulted in financial covenant defaults with the Company's two senior lenders and concern over the Company's ability to repay the indebtedness.

TRG was engaged by the two senior lenders to review the Company's financial forecast, cash needs, brand performance, restructuring plan and management's ability to implement the plan, and opportunities for cash infusion including through the sale of portions of the Company. TRG determined that while meaningful steps had been taken to improve performance, significant measures were still needed. TRG recommended the banks require the hiring of a CFO with crisis management experience or the engagement of an outside consultant with complete responsibility for implementing a turnaround plan. Covenants should be set to require the engagement of an investment banker to find a strategic buyer for the retail operations if acceptable benchmarks were not met. TRG recommended the restructure of a portion of the indebtedness as an asset-based facility to allow better monitoring of exposure. Reduction of administrative overhead as well as elimination of redundant operations was necessary.

Results: The Company located an asset-based lender that refinanced a substantial portion of the senior facility and the remainder was restructured with repayment expected through excess cash flow and the possible sale of a unit. The consolidation of its two retail brands reduced costs and redundant operations. A new plant manager improved operating efficiencies resulting in an improvement in operating earnings. Administrative costs were reduced at the corporate level and in the largest manufacturing subsidiary. The recent hiring of a new CFO is expected to improve reporting processes leading to additional improvements in financial performance.

Nature of Assignment:
Primary: Business Plan Review & Assessment
Secondary: Financial Restructuring
Tertiary: Evaluation of Management

Industry: Manufacturing; Retail