Client Profile
The Company was a well-established consumer healthcare products manufacturer and distributor with several branded and private-label products sold through major retailers, pharmacies and healthcare distributors. Despite strong underlying demand and an established customer base, the Company experienced a significant deterioration in liquidity following rapid rise in inventory, extended customer payment cycles, higher input costs and increased borrowing requirements. The Company had approximately $78 million of bank and subordinated debt, while working capital requirements had increased substantially. Lenders were increasingly concerned about leverage, covenant compliance and the Company's ability to fund seasonal inventory requirements. Management required a comprehensive solution that would release working capital, stabilize liquidity and restructure the Company's debt without disrupting relationships with key customers and suppliers.
Key Challenges
- Approximately $78 million of funded debt
- Rapid increase in receivables
- Extended customer payment terms
- Significant seasonal working capital requirements
- Higher raw material, freight and manufacturing costs
- Excess and slow-moving inventory
- Pressure on gross margins
- Tight lender covenants and limited borrowing capacity
- Increasing reliance on short-term financing
Our Mandate
A coordinated working capital improvement and debt restructuring program to address the Company's immediate liquidity requirements while creating a sustainable long-term capital structure.
- 13-Week Liquidity Management
- Inventory Optimization
- Receivables Acceleration
- Supplier & Payables Management
- Bank Debt Restructuring
- Subordinated Debt Restructuring
- Capital Structure Recapitalization
Results
- $27 million of liquidity released
- $18 million reduction in excess inventory
- $8 million reduction in funded debt
- $1.9 million annual reduction in cash interest expense
- Increased revolving credit capacity
- Extended debt maturities
- Revised financial covenants aligned with operating performance
- Improved inventory turns and purchasing discipline
- Accelerated receivables collections
- Improved supplier terms and payment management
- Preservation of key customer and supplier relationships
- Significant improvement in EBITDA margins and cash-flow generation
Client Outcomes
A fundamentally viable consumer healthcare company facing a significant liquidity squeeze was stabilized through a coordinated working capital and debt restructuring program. The combination of working capital release, inventory optimization, improved receivables management, lender negotiations and debt restructuring generated substantial liquidity, reduced financial pressure and provided the Company with the capital flexibility required to return to sustainable growth.
RCP engagements are tailored to the facts, stakeholders and objectives of each situation.
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