How Platinum’s immediate action is eliminating a significant loss to the owner
Situation: A plastics manufacturer, suffering a liquidity crisis due to a combination of unprofitable operations and lender fatigue, was poised to shut down operations and lay off all of its employees. The trusted advisor for the owner reached out to Platinum Group to identify an alternate strategy to the imminent shutdown. The stakes were high, as closure would trigger a call of personal guarantees that would result in significant loss to the owner.
Challenges:
- The lender had declared a default and constricted availability that impaired cash flow, causing the company to seek a replacement credit facility.
- Senior managers left with no notice, taking critical knowledge and capabilities with them when they walked out of the door.
- Vendors providing critical materials for production threatened to quit shipping.
- Seasonal customer orders were late in coming, exacerbating an already very tight cash position.
- Established customer pricing needed to be increased in order to contribute cash to the business.
Responses: On Day 1, Platinum conducted a quick assessment and identified areas requiring immediate attention. Operations were reduced to a skeletal crew until seasonal production could begin, thus conserving critical cash. Key vendors were contacted and asked to deliver products on a cash basis. A management team was assembled from key remaining employees and several recruited from the market to fill the void left by the management exodus. Cash was preserved for the eventual emergence of the seasonal business, a critical first step in this turnaround.
Results to Date: The company emerged from hibernation with cash necessary to respond to seasonal customer needs. Orders that were unprofitable were repriced. The company is repositioning itself in the market by focusing on the right customers and products, thanks to the retention of an industry sales veteran. The current lender is in process of being replaced with a new credit facility. Reestablished in the marketplace, the company is planning an exit once recurring positive EBITDA is established. Ownership is pleased with the expanded options that are now available after Platinum’s involvement.