Client Profile
A privately owned retailer operating 52 stores across the Midwest and Southeast United States. Founded over 30 years earlier, the company employed approximately 1,400 people and generated annual revenue of approximately US$285 million. Following several years of declining same-store sales, rising freight costs, and increased competition from online retailers, the company experienced a severe liquidity crisis.
Challenges
Over an 18-month period, Client experienced:
- Same-store sales declining by 17%
- Gross margins compressed by nearly 600 basis points
- Inventory levels increasing by 28%
- Significant covenant breaches under its senior credit facility
- Trade suppliers reducing payment terms
- EBITDA declining from US$22 million to a loss of US$6 million
Management projected that available cash would be exhausted within twelve weeks without immediate intervention.
Our Mandate
The Board engaged our restructuring team to:
- Conduct an independent financial assessment
- Stabilize liquidity
- Improve operational performance
- Restore lender confidence
- Develop a long-term turnaround strategy
Financial Restructuring
Working collaboratively with lenders and shareholders, we:
- Successfully negotiated covenant relief
- Extended debt maturities
- Reduced annual interest expense
- Reorganized working capital facilities
- Introduced enhanced monthly financial reporting
Results
- 100% of secured debt refinanced
- All supplier relationships preserved
- No bankruptcy filing required
- Over 1,100 jobs retained
- Business successfully returned to sustainable profitability
Client Outcome
Following stabilization, the shareholders successfully completed a recapitalization with a private investment group, providing growth capital for future expansion. The company has since resumed selective store openings and continues to generate positive free cash flow.
RCP engagements are tailored to the facts, stakeholders and objectives of each situation.
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