Engagement Results

Company:

R. J. Manufacturing

Industry:

Agriculture Equipment Manufacturing

Size:

Undisclosed at Client request

Expertise:

Debt Restructuring & Operations Improvement

Assignment:

The company was facing a total financial collapse that was expected to lead to foreclosure and ultimate liquidation. Over the previous two years the company had been kept afloat through continuous equity infusions by its major shareholder. MainStream was engaged to evaluate the company business viability and to evaluate restructuring possibilities.

Actions:

MainSteam conducted a rigorous assessment of the company’s operations, marketing, and financial position. The company engaged in producing large self-propelled sprayers that were typically sold to large corporate farmers or co-operatives all around the world. Powered by hydraulic motors supported by a large Caterpillar diesel engine, the equipment stood over 8 feet tall creating quite an impressive site. While the engineering had been quite cleaver the manufacturing process resembled more of a garage shop that a factory. Each machine was assembled individually with no two machines being identical. The company distributed their products through dealers who MainStream discovered, were taking advantage of the company through excess warranty claims. As a result many of the financial problems were the result of poor material usage, inventory shrinkage, and excessive warranty claims which resulted in a collapse of margins. The company was out of time and resources and without a financial restructuring or sale of the business they would have to cease operations.

Results:

MainStream recommended that the equity sponsor arrange with the senior lender to purchase the company through a structured foreclosure. This allowed them to maintain their equity position in the company, eliminate some of the uninterested debt holders, and permit an operations restructuring. The equity investor followed MainStream advice which resulted in a new company with a bright future.

We arrived at the company, a small Mid-Western manufacturer of self propelled sprayers, located in a small town on the mid-western prairie. The wind was blowing snow at 20 miles an hour at a temperature that was far below zero on the Fahrenheit scale. The problem we faced was helping the company face both a financial and operating crises. We had been engaged by the equity sponsor who had been pumping money into the company as well as guarantying the senior debt. The company had a strong backlog of orders but no cash and supplies who were unwilling to extend credit.