Financial restructuring for industrial supply distributor
Supplier stabilized relationship with bank lender and returns to profit following restructuring.
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The client
- A $90 million industrial supply distributor
The challenge
- Emphasized growth over profitability and working capital management
- Lost money for three consecutive years; in default on bank covenants
- Longtime bank relationship deteriorating
- Suppliers holding shipments due to late payments
The solution
- Immediately focused attention on collections to improve cash position
- Kept bank involved and informed of plans, activities, and progress
- Measured sales performance leading to elimination of low-production salespeople
- Reduced administrative and overhead personnel
- Analyzed profit by customer and product; created new pricing strategy and shifted cost of certain personnel to customers
The benefit
- Reduced ineligible AR by $2 million
- Bank relationship stabilized during restructuring period
- Consistently profitable each month once cost reductions completed
- Obtained new financing on very favorable terms; previous lender paid in full
