Background

• $75 million multi-location logistics company that had originated from the breakup of a consolidated, multi-division family business

  • Servicing the automotive industry, the Company’s fleet included 602 tractors and 1,050 trailers

• Prior to the breakup, the Company’s management was unaware of true EBITDA performance due to significant intercompany transactions with the other family-held businesses

• The Company was under contract with major automotive OEMs to transport parts to the OEM assembly plants, so positive performance was crucial to avoid accounts receivable offset by the customers

• Incredibly, as management believed profitability was significantly more favorable than it was, the Company, over a two year period, assumed an additional $35 million of new-truck lease debt with 7 different lenders

• Prior to CM&A involvement, the Company had experienced a 26% decline in revenue over the previous several years and total secured debt had grown to $40.2 million with a single lender commanding the revolving line of credit

  • As top-line revenue declined and debt had increased, the Company generated annual EBITDA of $4.2 million with annual debt service requirements of $12.3 million, a significant shortfall

• As a result, the Company was in default with all 7 senior lenders.  This was a complex lender group with complex intercreditor issues

CM&A Role / Turnaround Process

• CM&A Partner became Workout Advisor to the Company at the introduction of one of the major lenders

• Immediately negotiated forbearance agreements with all seven lenders, which involved going to an interest-only format with all lenders

• CM&A’s strategy was to take all actions necessary to increase EBITDA and reduce the Company’s unsustainable debt service requirements

• In support of this, executed an operational restructuring (“OR”) to eliminate $2.4 million in expense

• The operational restructuring included (i) removing $1 million of excess annual personnel expense and (ii) selling 144 underutilized tractors and about 400 underutilized trailers to reduce debt and debt service requirements

• Eliminated short-term rented trailers to reduce expense by $1.1 million annually

• Sourced and retained a replacement CFO and Director of Operations for the Company to better align management with the direction of leadership

• Additionally, retained a well-known regional distressed investment banking firm to evaluate strategic alternatives and a go-to-market strategy for a sell-side transaction

Outcome

• In support of the operational restructuring, successfully eliminated $7.3 million in debt and $3.6 million in annual debt service through the asset sales of 144 tractors and 400 underutilized trailers

• Added approximately $3 million of annual EBITDA to the Company’s bottom line as a result of the aggressive cost reduction and profitability improvement efforts

• Sold the Company in an asset sale transaction to a logistics-oriented Private Equity firm

• Fully-repaid the revolving line of credit senior lender and about 40% of the existing term debt with the remainder of the term debt being assumed by the new purchasing entity