Client Profile
A privately held aerospace components manufacturer supplying precision-machined structural and engine components to major aerospace OEMs and Tier 1 suppliers experienced significant financial pressure following several years of rapid growth. Although the company maintained a strong order backlog, it was unable to convert growing demand into sufficient cash flow. Production inefficiencies, labor shortages, rising material costs, quality-related rework, extended customer payment cycles and significant capital expenditures placed increasing pressure on liquidity. The Board engaged our team to stabilize the company's financial position, improve manufacturing performance, strengthen working capital management and restructure its balance sheet while protecting critical customer relationships and aerospace certifications.
Key Challenges
- US$90 million in annual revenue but insufficient free cash flow
- US$68 million of senior and subordinated debt
- EBITDA declined from US$11 million to US$2 million
- Production capacity constrained by skilled-machinist shortages
- Significant overtime and temporary labor costs
- Rising aerospace-grade titanium, aluminum and specialty alloy costs
- Outsourced heat-treatment and special-processing bottlenecks
- High levels of work-in-process inventory
- Customer delivery performance below contractual targets
- Quality-related rework and scrap materially above historical levels
- Approximately US$24 million of capital expenditure invested in new equipment that was not yet producing expected returns
- Significant debt maturities within 18 months
- Lenders concerned about declining EBITDA and covenant compliance
Our Mandate
- Liquidity & Financial Stabilization
- Manufacturing & Operational Restructuring
- Working Capital Optimization
- Capital Structure & Strategic Review
Results
- Liquidity crisis successfully resolved
- No formal insolvency proceedings required
- US$19 million reduction in net debt
- EBITDA increased by approximately 600%
- EBITDA margin increased from 2.2% to 13.5%
- US$9 million reduction in inventory and work-in-process
- On-time delivery improved from 68% to 93%
- Scrap and rework reduced by more than 60%
- Approximately US$12 million of unnecessary capital expenditures deferred
- All major aerospace customer relationships preserved
- Senior lender covenant compliance restored
Client Outcomes
Following the restructuring, the company transitioned from a capital-intensive, capacity-constrained manufacturing model to a disciplined, cash-flow-focused operating platform. The company was able to increase revenue and production without making the previously anticipated level of capital investment. Improved production scheduling, higher machine utilization, reduced scrap and better working-capital management substantially increased profitability and liquidity. The successful restructuring restored lender confidence, strengthened the company's balance sheet and positioned the business to capitalize on continued aerospace demand and increasing requirements for qualified domestic suppliers. The company subsequently secured several new multi-year customer contracts and began evaluating strategic acquisition opportunities using its improved balance sheet and substantially stronger cash flow.
RCP engagements are tailored to the facts, stakeholders and objectives of each situation.
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