Designed & Developed by Eight Eleven Inc.
>> Solvent manufacturer
>> Electronics manufacturer
>> Opera Diva
A Pennsylvanian chemical manufacturer firm ran into poor cash flow after a downturn in its traditional B2B market area. It was unable to adjust its marketing quickly enough to prevent a number of accounts becoming seriously delinquent. Its bank line of credit became exhausted.
A suit was filed for approximately $300,000 for unpaid supplies. The landlord was also ready to take legal action for well-overdue payments. Other collection activity was likely to proceed to court unless accommodations could be made with suppliers.
The assets of the company were virtually all subject to UCC-1 lien. In other words, they were either leased or funded with borrowed money. The corporation was the sole defendant in this suit. No personal guarantees were involved and so the signing officer was not named as a defendant.
We could demonstrate to the plaintiff and the landlord that there was insufficient cash flow to permit the company to stay in business with its present debt load.
We were able to access a sum of alternative financing to potentially settle these two matters at a cost that the company could bear. The landlord was happy to provide rent relief by accepting lower payments for six months.
The $300,000 suit, filed by a multinational chemical company, was settled for $37,500, being 12.5 cents on the dollar. Cash came from the borrowed funds.
The case was settled after we showed the plaintiff’s attorney that a judgment would immediately force the company out of business. We documented the relevant financials and the options open to us.
The option accepted by the plaintiff was that which guaranteed immediate cash, to at least pay for a portion of its sunk costs. This was a considerably better alternative than forcing the debtor firm to close its doors – and receiving nothing.
Our client survived, the crisis over, and is now able to concentrate its energies on a more effective and diversified marketing strategy. This minimizes the chance of a similar crisis in future.
A highly specialized electronics firm, located in Denver, Colorado, was referred to us by legal counsel.
The firm provided state-of-the-art equipment for a small handful of major manufacturers. Its eggs were very much in one basket in its narrow product line to these few firms. Its market was highly cyclical and currently in a downturn that had lasted over two years.
A major customer filed bankruptcy. Our client was left with over $1 million of work in progress. Supplies had already been ordered. Some had been paid for. But the company was burdened by over $400,000 in delinquent payables and negligible current revenues. Try as it might, it could not immediately develop the new business that it needed in its specialist market in order to pull itself out of this disaster.
We were contacted at the point when creditor legal actions had reached a crescendo. The high tech components in stock were of little use to any other entity than the bankrupted customer. These, plus the unencumbered corporate assets, would bring low garage-sale prices if put up to auction. We were able to show this to creditors.
A strategy was put in place to communicate the true situation faced by the firm to all concerned. Creditors and their agents were asked for time to give our client time to bring in new revenues.
After a six-month payment hiatus we were able to build a settlement “war-chest.” Part of this came from funds that the company’s founder was able to access independently. Accounts were then settled on an across-the-board pro rata basis for 24.5 cents on the dollar.
Business was still slow, but the company was able to survive. Creditors minimized their losses by getting substantially more than if the company had been forced out of business.
The Virginia-based agent for a major opera star contacted us when a TV station sued him and his company for lost revenues. The dispute involved a special PBS-affiliate program, designed to raise funds. The agent’s firm and the station had previously agreed to share equally in the profits. Unfortunately, the promotion tanked and the agent’s business was sued for $137,000, being its share of the losses.
We were able to raise specific objections about certain aspects of the financials. As well, we showed that the agent’s firm was under financial stress. Had it folded, as it might, subsequent to a judgment, the TV Station would receive nothing.
The suit was settled for $47,500, being approximately 40% of the amount sought. This was accepted in the form of a monthly payment schedule.
Each side was satisfied with the outcome. Our client was able to stay in business. The PBS affiliate received a chunk of its sunk cost. And the two sides still speak with each other – possibly to do business again in the future.
These results are typical. Every situation is different. Give us a chance to analyze your own position and give you feedback.
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