Project Cheese

Situation

After reaching an agreement with the senior lenders at the end of 2022, the Company’s expected financial performance in 2023 was lower than budgeted due to a combination of factors, including a delay in the completion of the insourcing project and additional unforeseen marketing expenses. Given the tightened liquidity profile, the Company deferred payments to critical vendors. These payments were due on a certain date and had default triggers if not paid, which could have forced the supplier to terminate the supply agreement and the Company to purchase a significant amount of raw material. The sponsor proposed a liquidity solution totaling $15MM that would cover deferred payments to critical vendors and provide the Company with enough cash to operate through maturity. This proposal included light concessions from the senior lenders as well.

Engagement

The Company re-engaged G2 to serve as a financial advisor following the work completed in 2022 with a scope involved negotiating an amendment with the lenders.

Outcome

G2 worked closely with the sponsor and management team to assess the liquidity need and long-term forecast to support the liquidity need and proposal. However, the lenders pushed back against the proposal and hired their own financial advisor. G2 simultaneously led the amendment negotiations and preparation for a bankruptcy filing, serving as a contingency plan and negotiation tactic.