Project Elk

Situation

The Company had engaged G2 previously to advise it on an operational turnaround, but struggled thorugh the self-managed implementation of that plan. They were in breach of loan covenants and faced rapidly dimishing liquidity. The Company’s equity sponsor agreed to provide funding only if it could be senior to the substantial loan facility. Stakeholders reached an impasse.

Engagement

The lender engaged G2 initially to conduct a liquidation analysis of its assets–inventory and accounts receivable–and advise it on weighing that path against the low-ball buyout offers parties were submitting for those assets. G2’s assessment pointed to a far higher recovery through a managed liquidation. Meanwhile, the Company’s board surprised everyone with a Chapter 7 bankruptcy filing. The lender in turn sought and was granted relief from the automatic stay, enabling it to take possession of its collateral. The lender then engaged G2 to execute the liquidation. With hundreds of customer accounts and a vast amount of inventory in large warehouses across five locations, the task would require considerable coordination and resources.

Outcome

G2 immediately secured the assets and negotiated commitments from key team members to assist in what would be a months-long effort. Through extensive outreach G2 found multiple parties interested in the inventory, ultimately proceeding with a party that agreed to both hire many of the staffers and keep much of the inventory in place (preventing a time-consuming move). G2 also leveraged team members’ institutional knowledge in the collection of A/R which provided a superior outcome compared to offers from external liquidators. At $4.4 million, the lender’s final net recovery was slightly higher than G2 had initially forecast to the lender, and was multiples above the initial buyout offers.