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Restructures and Turnarounds

 

Case Studies:

(If a case study echoes with your need, please call for details and other relevant references.)


True SOS Case –Not All Lessons are Learned by Success

Lessons are often learned from error and failure rather than success. In one instance, SOS was hired to assess why a business was in dire cash flow straits, despite profitable CPA-reviewed statements. SOS quickly determined that the CPA-reviewed financial statements were in gross error due to faulty management reports. SOS cleaned up the management reporting system and its processes, helped the business find the necessary working capital, developed a robust and profitable plan for proceeding, and convinced 70 unsecured creditors to cooperate with no payment until a regional bank was paid in full. The bank, however, hired an attorney that demanded immediate liquidation and would not support the receivership despite in highly profitable receivership plan. Idaho does not have the power of stay in a receivership, and the company filed for Chapter 11 bankruptcy. SOS could not continue its involvement given its previous role as the receiver. Once SOS had been removed, the company continued with the go-forward plan developed by SOS, however it acquiesced to making some preferential creditor payments, which had been denied during the receivership. The company executed the go-forward plan well in the field. However, while in bankruptcy the debtor in possession failed to submit the required reports in a timely manner. Although the company had been highly profitable, and with a few more months of operation would have been able to pay the bank off in full, the bankruptcy court was left with no option but to liquidate the highly profitable company as a result of the non-timely reporting and its preferential payments to unsecured creditors.

Bankruptcy rules are extremely rigid. This failure to understand that rigidity by the debtor in possession ended a forty-five-year-old firm and destroyed the retirement of a 70-year-old owner! This also caused the loss of value to over 50 other creditors who cooperated with the go-forward plan. While SOS is an expert in go-forward plans, be sure to engage a professional lawyer, who is a specialist in bankruptcy and who actually cares. Unfortunately, debtor attorneys often cannot spend the time needed by their small business clients as they are paid only a fraction of fees that creditor attorneys are paid.


True SOS Case – Harvesting the Value in the Intangibles

SOS was engaged to assist a small company with less than $30,000 in assets and over $600,000 in debt, over $200,000 of which was unpaid IRS 941 trust funds, and $150,000 to a regional bank. The company had substantial work on hand that had no value in the marketplace, as it was underbid. The bank involved supported the receivership due to no real value to be gained in liquidation. SOS, under an owner-voluntary receivership, renegotiated the contracts and the costs with suppliers. SOS then assisted the company to complete its contracts over a one-year period. This support allowed the company to have the time to earn the necessary funds to resolve its secured debts in full, and its unsecured debt was paid at a discount as negotiated by SOS. Work on hand can be valuable even when past performance on its work incurred a loss, if the work on hand can be renegotiated by a third party and intangible assets harvested over time.


True SOS Case – Chief Reorganization Office

SOS was engaged to assist a business with six offices that was in financial trouble. SOS quickly determined that money had apparently been misappropriated. SOS directed the company for six months to conclude all contracts. SOS convinced 124 creditors to cooperate in an effort optimize the asset value of the business and subsequently liquidated the company. All contracts were fulfilled, and tax filings as well as other commitments were completed. There were no new victims. On behalf of the owner, a legal retainer was paid for his cooperation and successfully addressed the allegations of fraud and security law violations by some of the creditors. This action assisted not only the owner but also the creditors and government regulators get their much-needed information and answers.


True SOS Case – Lean should mean “Viable with lots of Opportunity”

SOS engagements in turnarounds and restructurings generally include a company lean element, which is often interpreted as layoffs. Though lean includes a review of the workforce and often layoffs, this fear is a very short-term issue. The layoff portion of lean needs to be done quickly and humanly. After the layoffs, there needs to be a strategic workforce reengagement strategy Immediately after a proper management of layoffs and workforce reengagement, the company’s morale quickly leaps upward with a high level of excitement.

EXPLORE

If you always do what you've always done, you'll always get what you've always gotten."

-Jack Canfield