Client Case Example #6
Profile
Privately held, multi-generational contract manufacturing business. Father had sold his 50% share to brothers, 25% each. Original first generation 50% partner still in primary Sales role.
Situation
CenterPoint received a referral from the Special Assets department of a local commercial bank. They were uncomfortable with the business trend and customer concentration. The business earned 60% of its revenue from one customer that was private-equity backed and had a troubled past. The bank had exposure on two pieces of property, a line of credit and equipment financing.
Actions Taken
Our CFO engaged with the owners to prepare a twelve-month rolling forecast, which did not reduce the concentration exposure. With this forecast, we ran a process to source a secondary lender for the line of credit and were successful within four months. Simultaneously, we engaged an appraiser to appraise the manufacturing equipment for refinancing. In conjunction, we engaged a realtor to list one of the properties (former manufacturing site) for sale and to secure a real estate investor to execute a sale-leaseback transaction on the existing manufacturing facility.
Results
Our efforts were successful in securing a secondary lender for the line of credit, taking out our referral bank. Our realtor was successful in selling the first property within three months, extinguishing the mortgage with the referral bank. We were also successful in executing a sale-leaseback transaction with an out-of-state real estate investment firm for the current manufacturing facility, again extinguishing the mortgage with the referral bank. Unfortunately, the 60% customer pulled the Client’s contract and filed for bankruptcy before we were able to refinance the manufacturing equipment. The Client, in turn, was forced to file for bankruptcy protection. The Bank liquidated the manufacturing equipment at auction. While not a successful outcome for the Client, our CFO was able to reduce the exposure for the referral bank by over 90%.