Interim Management

SCP’s proven operators can help bridge gaps in areas where companies and management teams are struggling, to help effectuate process improvement and/or a financial restructuring.

Our experience has taught us the importance of collaboration and frequent communication in creating a successful outcome.

Interim CEO, CRO, CFO, COO and floor-level general managerial services focused on:

  • Hands-on management, with a goal of creating long-term sustainable companies
  • Development of revenue strategies and execution plans to create growth
  • Monetization of non-core assets through improved operations, strategic liquidations or divestitures
  • Long-term labor, staff planning and realignment for labor cost optimization
  • Maximizing the value of productive resources through strategic sourcing and/or site location optimization

Independent Board Member services include:

  • Development & execution of business plans
  • Strategic oversight of turnaround and restructuring situations

Case Studies

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Norpac Foods, Inc.

Situation

  • NORPAC Foods, Inc, was an Oregon-based farming cooperative specializing in frozen vegetables, generating over $300 million in annual revenue.
  • Inefficient operations, underinvestment into fixed assets at its production facilities, and limited inventory control led to significant operating losses: $100+ million over a 5-year period.
  • Deteriorating liquidity led to multiple forbearance agreements on its $125 million senior secured bank debt.
  • Following an unsuccessful sale process, SCP was retained as Chief Restructuring Officer in June 2019 to evaluate strategic alternatives and negotiate with the senior secured lender.

SCP'S SOLUTION

  • SCP immediately instituted a 13-week cash flow budget and implemented a tight expense management policy to maximize the liquidity runway.
  • Replacing the incumbent investment bank, SCP re-engaged with potentially interested parties to negotiate a sale and repay the senior debt.
  • SCP supported all day-to-day operations of the business, negotiated with various vendors, and reduced costs in an effort to extend the timeline for a strategic sale.
  • Within two months, an agreement was reached with Oregon Potato Company (OPC) to acquire substantially all assets of NORPAC through a 363 sale via a Chapter 11 bankruptcy.
  • NORPAC filed for Chapter 11 protection on August 22, 2019.

RESULTs

  • Ultimately, NORPAC assets were sold via a two-step transaction: business operations were acquired by OPC and most of the real estate was acquired by Lineage Logistics.
  • Despite OPC terminating its original stalking-horse bid, SCP was instrumental in managing a highly-successful in-court auction process. The senior secured debt was fully paid off and the case avoided a conversion to a Chapter 7. 
  • The majority of NORPAC’s processing plants continued their operations, and an estimated 1,900 jobs were be preserved.
  • Furthermore, SCP supported the integration process and an orderly wind down of the remnant estate.
  • A Plan of Liquidation was approved in November 2020, and a meaningful (30-35%) recovery to unsecured creditors was expected. 
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Pacific Ethanol, Inc.

(Now known as Alto Ingredients, Inc. – NASDAQ: ALTO)

Situation

  • Pacific Ethanol (now known as Alto Ingredients) is a publicly-traded producer of specialty alcohols, with operations in Illinois and the West Coast. Revenue in 2019 was $1.4 Billion.
  • Pre-COVID, Pacific Ethanol was already experiencing significant margin compression related to its core product, ethanol.
  • As COVID lockdowns expanded nationwide and gasoline demand crumbled, ethanol prices collapsed to the point where gross margins on ethanol production turned negative.
  • Pacific Ethanol reported a Q1 2020 EBITDA loss of $12 million. Poor financial performance resulted in covenant violations with its secured lenders.
  • SCP was engaged as Chief Restructuring Officer in March 2020, tasked with spearheading negotiations with secured lenders and developing a viable turnaround plan for the business.

SCP'S SOLUTION

  • SCP immediately engaged in discussions with the Board and management to idle unprofitable plants – particularly on the West Coast – and to significantly reduce spend on personnel and trade in order to preserve liquidity.
  • Simultaneously, SCP induced management to refocus operations on higher-margin products. A rapid operational shift enabled the company to significantly benefit from soaring demand for hand sanitizers. 
  • To alleviate concerns from secured lenders, SCP re-engineered Pacific Ethanol’s financial model to reflect a fundamental change in operations, demonstrating sufficient liquidity to begin paying off debt.
  • Furthermore, in order to reflect the paradigm shift of Pacific Ethanol, the Board promoted the Chief Operating Officer to Chief Executive Officer and allowed the founder (focused on ethanol) to retire.

RESULTs

  • Pacific Ethanol’s EBITDA jumped from negative $12 million in Q1 to positive $29 million in Q2 and positive $34 million in Q3 2020.
  • In conjunction with its shift toward higher-quality alcohols, Pacific Ethanol began selling its ethanol-focused plants, using the proceeds to paydown debt.
  • Strong operational and financial performance also allowed the company to tap equity markets, raising $75 million in Q4 2020.
  • As a result, SCP was able to broker a debt restructuring deal with its secured lenders, which provided for a rapid reduction in loan balances and a waiver of all defaults. During 2020, Pacific Ethanol was able to reduce its loan balances from ~$245 million to ~$100 million.
  • Pacific Ethanol was guiding toward being net term debt free by the end of 2020.
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Confidential Wellness Products Company

SITUATION

  • Company was facing executive turnover, several active government investigations (including SEC related to financial disclosures and DOJ related to Foreign Corrupt Practices Act violations by prior management), a precipitous decline in revenue and cash flow because of the impact of these distractions, and acute liquidity challenges. 
  • SCP was engaged by the board, inheriting a situation that was extremely precarious from day one. The Company’s global operations represented the amalgamation of a variety of M&A transactions, of which many of the Company’s entities had not been successfully integrated by prior management.  The Company’s core business relied on a global network of brand partners to conduct sales of the Company’s health and wellness products.  There was a meaningful risk that these partners could lose confidence in the Company.  
  • Meanwhile, company insiders engaged in several alleged acts against the best interests of the Company, which became the subject of litigation.  Against this backdrop, performance was weak and deteriorating. 

SCP'S SOLUTION

  • SCP professionals delivered exceptional services, including, but not limited to, the following areas: 
    • In the role of CRO & CRO Support, SCP was instrumental in identifying and advising the Board on appropriate measures to protect and maximize the Company’s value.
    • SCP assisted the Company in resolving a settlement with the DOJ/SEC on certain matters that were subject to investigation. 
    • An SCP team member also became the Company’s Principal Financial Officer after the departure of the CFO, and the SCP team oversaw the finance function at the Company.
    • SCP extended the company’s cash runway by several months from the time of its engagement until a viable sale option emerged. This effort involved liquidity management in a complex web of global entities supported by an understaffed finance and accounting team impacted by turnover and poor integration of prior transactions. 
    • SCP conducted preparations for Chapter 11 process under an expedited time frame and supervised a robust sale process by an investment banker.
    • SCP also worked directly with a strategic buyer to sell a non-core division.

RESULT

  • The SCP team shepherded the Company’s social selling business through a sales process consummated through Chapter 11 proceedings. The sale process allowed the company to survive as a going concern and preserve jobs. 
  • The Company’s social selling business was sold for an estimated $28 million in proceeds to the estate, funded as a credit bid by the Debtor in Possession (DIP) loan provider. The purchaser also modified their bid to purchase the equity, rather than the assets, of one of the company’s key subsidiaries, further enhancing recovery to creditors above and beyond the initial bid. Post-closing, the SCP team also oversaw the sale of the Company’s Direct Store Distribution (DSD) business, unlocking additional value. The sales closed in October 2022 and December 2022, respectively. 
  • The Chapter 11 plan received court approval for confirmation after resolution of a dispute negotiated by SCP and counsel over cash reconciliation matters.  Due to settlement terms, cash was set aside for a liquidating trustee to pursue litigation claims that may hold significant potential value for creditors.
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Organic Agriculture Products Company

SITUATION

  • An organic agriculture products company, a pioneer in the organic industry, was the first U.S.-based supply chain solutions company focused exclusively on accelerating the availability and reliability of organic, non-GMO and regeneratively grown food. The Company operated as a supplier and manufacturer of organic, non-GMO and specific food and feed ingredients (contracting with over 1,400 growers in 2019), with a diverse supplier and customer base globally.
  • Company had operations in the US, Canada and Argentina and generated over $200 million in sales annually.  Company was majority-owned by sponsor AMERRA Capital Management.
  • With a confluence of industry headwinds, the pandemic (including CPG companies stalling new product development), business-specific factors, and balance sheet capitalization from an industry roll-up led the Company to experience a liquidity constraint and default under the senior secured facilities.
  • Following defaults, SCP was retained to serve as financial advisor and Chief Restructuring Officer to develop a cash flow forecast, provide recommendations for operating improvements, and review strategic alternatives to maximize recoveries to all stakeholders.

SCP'S SOLUTION

  • Developed weekly cash flow, operating budget, and review of strategic alternatives to negotiate forbearances with the disparate senior lenders, which provided Company with continued liquidity from the lenders to maintain operations to maximize value.
  • Identified and implemented operational changes, particularly relating to cash management, to accurately and effectively manage liquidity via the collection and disbursement processes and reduce expenses.
  • Initiated a direct line of communication with the lender groups and advisors and established weekly reporting to provide in-depth updates.
  • Negotiated profitable sales opportunities, with working capital financing from customers versus fatigued lender group.
  • Filed Company for Chapter 11 bankruptcy to protect assets and maintain critical state regulatory licenses required for operations.
  • Following an unsuccessful investment-bank-led going concern sale, developed process and analysis for the review and approval of inventory sales to maximize value to the estate.

RESULTs

  • Successfully negotiated forbearances with existing secured lenders (four separate senior secured facilities), which provided critical runway to explore available alternatives and preserve value.
  • Filing for Chapter 11 protection with consensual use of cash collateral allowed the Company to continue operations and preserve value for all stakeholders.
  • Although the investment bank-led going-concern sale process was unsuccessful, the Debtor was able to execute an orderly sale of all inventory, monetize certain contract assets, and sell individual operating facilities via court-approved Section 363 asset sales to maximize recoveries.
  • Company achieved confirmed Chapter 11 Plan of Liquidation, allowing for the orderly wind-down of operations.
  • Resulting recoveries to creditors in line with initial expectations at the outset of the case.
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Bicycle Equipment Distributor

SITUATION

  • $30 million national wholesale distributor of bicycles and bicycle-related equipment such as frames, suspensions, saddles, and tires under the Fuji, SE Bikes, Tuesday, Kestrel, Breezer, and Oval brand names.
  • The Company emerged from bankruptcy in February 2019 and retained an SCP professional as interim Chief Financial Officer.

SCP'S SOLUTION

  • Developed a five-year financial forecast and 13-week cash flow model to monitor the Company’s liquidity and long-term outlook.
  • Restructured the leadership team and reduced SG&A costs to better position the Company for future growth.
  • Worked with the operation and finance teams to implement inventory and financial controls.

RESULTs

  • Stabilized the business over the course of an eight-month period resulting in the equity sponsor being able to achieve their preferred return two months ahead of schedule.
  • Helped hire full-time Chief Financial Officer to lead Company upon exit.
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Midstream Oil & Gas Pipeline Services Company

SITUATION

  • A $160 million midstream oil and gas pipeline construction and maintenance services company was contracted for large infrastructure projects at margins that were not sustainable and had execution problems on those projects.
  • SCP provided interim Chief Operating Officer and Chief Financial Officer services that provided staff leadership while implementing significant cash management improvements and operating improvements related to the day-to-day operations.

SCP'S SOLUTION

  • Addressed significant shortfalls in the entire Purchase-to-Pay process.
  • Improved tracking and reporting of project costs and schedules.
  • Standardization of the estimating practices across all operating units.
  • Significant reductions in direct and indirect labor.

RESULTs

  • With SCP’s help, there were significant reductions in company fuel usage and significant increases in employee accountability.
  • These efforts delivered annualized cost savings of >$10 million, returning the organization to a positive EBITDA within 90 days.
  • New changes improved the utilization of company-owned equipment and the AR collection process.