Project Firebird

Situation

The Company faced a challenging situation triggered by the COVID-19 pandemic, resulting in a liquidity crunch. Supply chain disruptions, increased order lead times, and overstocked inventory caused financial stress. During the early part of COVID-19, as people stayed home and engaged in outdoor activities, the Company experienced a surge in sales to unprecedented levels. Subsequently, the Company strategically placed orders from overseas vendors, which took significantly longer than expected to reach the Company’s distribution centers. By the time the inventory arrived, the consumer demand has soften significantly. An increased level of inventory and slowdown in consumer purchases further exacerbated the Company’s liquidity issue, tying up a significant portion of the Company’s cash in working capital.

Engagement

The Company engaged G2 to assist in building the long-term financial model, a 13-week cash flow forecast, facilitate negotiations between the Company, the sponsor, and the lender group. In addition, G2 assisted the Company’s management team in developing operational milestones (initiatives include inventory reduction, cost cutting, warehouse consolidation) that were ultimately presented to the lenders, showcasing the Company’s progress in implementing certain critical measures to preserve cash. Subsequently, the Company engaged G2 to support the Company in the negotiations of amendment with the senior lenders, structuring meaningful and reasonable financial covenants, while facilitating a capital infusion from the sponsor. Lastly, the Company retained G2 to negotiate payment terms with critical vendors to manage and preserve cash.

Outcome

G2 quickly rebuilt the Company’s financial model, improved the 13 week cash flow reporting mechanics and worked constructively with the lenders’ financial advisor. G2 assisted the Company’s management team in developing and presenting the operational initiatives and contingency plan should the identified initiatives not improve the liquidity profile. G2 then successfully negotiated the amendment to the credit agreements and supported the Company and the senior lenders in structuring the outstanding term loan and implementing reasonable and achievable financial covenants. In addition, G2 effectively communicated with critical vendors and negotiated payment terms. As a result, the Company received the remaining funding required from the sponsor to pay critical vendors and maintained healthy liquidity levels.