Throughout complex financial reorganizations, SCP delivers the trusted advice, meaningful insights and stable leadership necessary to get to the right decision. SCP combines its deep financial expertise and extensive understanding of the restructuring process to solve the most challenging situations a company may face.
Activities performed with management on a day-to-day basis include:
Develop a detailed cash model to accurately forecast liquidity
Activity manage cash flow to optimize expenditures and cash collections procedures
Re-establish credibility and communication between the company and its key stakeholders
Propose and review reorganization plans that are in line with company and stakeholder goals, and are consistent with projected cash flow
Establish valuation criteria, ratio analyses and other metrics for capital structures with various forms of capital
Determine assets and business valuation
Assess existing financial reporting methodologies and propose improvements
San Francisco-based autonomous vehicle technology company went public via a SPAC reverse merger in November 2021 at a $5 billion valuation. The business required massive amounts of capital to reach commercialization of its developing product and was unable to raise ample capital in the public and private equity and debt markets. This led to the evaluation of strategic alternatives, including a sales process, bankruptcy or out-of-court liquidation process.
The situation was unique and complex as interest in capital-intensive autonomous vehicle businesses had dried up in the current debt and equity market environment, causing the collapse of several competitors.
As a publicly traded high-profile Silicon Valley company, the board sought to appropriately evaluate all options to serve stakeholders best and fulfill obligations of the company.
SCP was hired by a special committee of Company’s board to evaluate liquidation and bankruptcy alternatives to the existing sales process.
Working with the management team, SCP’s extensive network and knowledge of the sector, SCP prepared a robust analysis of strategic alternatives for the board of directors, including the cash needed to continue operations, cash required to orderly wind down, cash required to file Chapter 11, and a strategy to reduce settlement amounts.
Given the fact that the Company had ample cash but was contemplating liquidation only 18 months after going public, the threat of shareholder litigation was inevitable, meaning thoughtful precision, independent verification and sound advice were paramount to SCP’s analyses presented to the board and shareholders.
Since the sales process yielded low valuation offers, the Company pursued a dual-track approach, in which SCP successfully negotiated with major creditors, reducing the settlement amounts exponentially and increasing value to stakeholders.
SCP’s analyses and advice to the board’s special committee enabled them to improve recovery to stakeholders, preserve employment for many key employees, fulfill their obligations, and minimize potential litigation claims.
In May 2023, Company was purchased by Applied Intuition Inc. for $71 million.
SCP played a critical role in preserving valuation for stakeholders and advising the board through a unique and challenging situation during uncommon times in the capital markets.
Dance Education And Competition Event Business
Company was an L.A. headquartered nationwide event business in the dance education and competition category, operating under several industry-leading brands with 250,000+ attendees annually across 135+ events in 60 cities.
The Company had gone dark on communicating with lender while facing financial challenges and triggering events of default. Against that backdrop, an investment banker was in the market seeking out junior equity opportunities on its behalf.
The Company pivoted to attempting to pursue a sale transaction to a private equity firm, alongside an acquisition of a much more profitable competitor, but management claimed closing had been delayed. The transaction was scheduled to close in the next few weeks.
Against that backdrop, liquidity began to deteriorate as the Company was approaching its most important summer events season.
Initially, SCP was engaged to review cash flow and assist the Company in communications with its senior lender, a private credit firm.
Immediately upon engagement, SCP performed an on-site visit to review cash flow and understand business situation on the ground in the L.A. headquarters with the management team.
SCP reviewed the cash flow forecast and confirmed an imminent liquidity need for the company to continue operations and meet priorities such as payroll within 10 days.
However, the private equity buyer sought to delay the sale transaction by 1 to 2 months upon finding out about the near-term liquidity challenges, which called for a bridge solution.
SCP assisted in negotiating a term sheet and facilitating a loan amendment to provide for a capital infusion, whereby the lender took on board control, however, if the transaction did not close by a certain date, the lender had the ability to foreclose on the equity.
SCP took on a revised Chief Restructuring Officer and Chief Restructuring Officer Support role during the interim period before the pending sale transaction to exercise cash flow oversight and manage liquidity and funding requests reporting to the Board.
Assisted the Company in achieving a bridge funding solution with its existing lender by improving communication and restoring confidence in the situation.
Supervised cash flow decision-making prudently on a day-to-day basis, which allowed the Company to successfully operate its major summer events without disruptions - management reported that the summer events were considered the best ever by attendees.
Prepared LBO/merger model and extensive analysis on transaction attributes and facilitated a series of conversations regarding transaction alternatives including operational improvements, which helped the Board of Directors build negotiating confidence and extract value in their ongoing negotiations with the private equity buyer.
The Company closed on the sale and merger transaction; the senior lender received improved recovery in the transaction during last-minute negotiations – receiving all original loan principal in cash - and the lender, equity, and management obtained various equity interests with further upside for recovery.
Sporting Goods Business
Confidential sporting goods business operating in snow and paddles sports segments with significant direct-to-consumer operations and 11 retail locations across Michigan, Kentucky, and Texas.
OAB was facing challenges in cash flow with both inventory and A/P positions:
The paddle sports business, Austin Canoe & Kayak, had built up excess A/P balances with no near-term cash flow prospects to repay.
The snow business, Summit Sports, was under-inventoried heading into peak season, risking margin opportunity.
Vendor relations deteriorated significantly as OAB’s liquidity picture weakened over the course of the year, with threatened lawsuits due to poor communication.
OAB was working on a refinancing process to allow it to buy inventory and catch up on A/P but was in a challenged collateral situation.
Initially, SCP was hired to provide a viability assessment of the Company’s cash flow and business plan.
After OAB closed a refinancing, SCP was engaged to oversee all cash flow/vendor issues for the entire organization.
SCP was then provided with the mandate to sell the Company to maximize recovery to stakeholders.
SCP conducted a robust sale process, which attracted strategic interest due to healthy inventory position and valuable URLs such as skis.com and snowboards.com.
Upon closing a sale, SCP assisted the company in arranging an Assignment for Benefit of Creditors (“ABC”) transaction to complete a bankruptcy-like process at a low cost.
SCP supported the Assignee in the wind-down process thereafter.
Resolved vendor issues to obtain a critical mass of inventory heading into the winter season and enhance margin and borrowing base.
Implemented cash discipline to increase the likelihood of recovery to stakeholders and bridge the company through a sale process.
Successfully sold the Company at year-end 2021 to the House, a subsidiary of Camping World.
Well-timed sales enhanced the benefits of the sale to creditors due to the capture of season margin in Q4 2021 and selling inventory at its full value.
Senior secured lender was paid in full and returned significant recoveries to junior secured creditors.
Conducted an efficient wind-down of the Company through an ABC transaction resulting in additional monetization of balance sheet assets in excess of process costs.
Manufacturer of Vitamins & Supplements
Contract manufacturer of vitamins, supplements, and personal care products.
Leading up to its acquisition, an overall industry slowdown resulted in the Company facing challenges including achieving short-term sales and collection targets and cash flow volatility
SCP was engaged to collaborate with the Company’s management to mitigate risks relating to the sale process and ensure maintenance of sufficient liquidity for the company through the target closing date.
Over a two-month period, SCP closely monitored the Company’s cash flow. Weekly reports jointly prepared by SCP and Company management were shared with the bank, providing a comprehensive overview of the Company's financial position while the sale transaction proceeded.
SCP created an enhanced 13-week cash flow monitoring tool, met weekly with the Company’s management on the sale process and risk mitigation, advised the client on vendor negotiations needed to maintain liquidity, and had regular communication with the bank on the sales process and any risk-mitigating strategies to maintain liquidity.
Through closely working with the Company’s management team and diligent monitoring and proactive risk mitigation, SCP helped ensure that the company maintained sufficient liquidity. As a result, the Company successfully completed the sale transaction, achieving its strategic objectives.