• Stabilized cash flow
  • Executed an out of court balance-sheet reorganization
  • Developed successful recapitalization plan 
The home security provider had $7MM in recurring monthly revenue (RMR), but was suffering from declining industry trends, increased competition, and significant technology upgrade costs. The company engaged CR3 professionals who quickly determined that an operating company bankruptcy would be detrimental to the company’s revenue, would rapidly destroy the value of the estate, and would not address the underlying problem of excessive leverage. The team began preparations for bankruptcy as a defensive measure and supported lender negotiations. The company eventually executed a successful out-of-court balance-sheet restructuring with a private equity firm, which injected new equity into the business and kept several of the existing lenders in the capital structure as either debt or equity holders. CR3 professionals helped the company stabilize cash flow while it determined its recapitalization options.
 

The Situation

  • Provider of home security installation and monitoring services with large branch offices and $7MM in recurring monthly revenue (RMR)
  • Company was suffering from declining industry trends, increased competition, and significant one-time costs due to technology upgrades
  • Debt service costs rose as its leverage ratios increased following an acquisition that company funded with debt instead of equity

The Work

  • Determined quickly after being engaged that an operating company bankruptcy would be detrimental to company’s revenue, would rapidly destroy value of estate, and would not address underlying problem of excessive leverage
  • In support of eventual balance-sheet restructuring, engagement team projected and managed liquidity under multiple proposed restructuring scenarios
  • Began preparations for company’s bankruptcy as a defensive measure, including a potential holding company bankruptcy in which operating entities would be restructured out of court
  • Supported company’s negotiations with over 15 members of company’s lender group

The Results

  • After several standoffs between the first- and second-lien lenders and company, company eventually executed a successful out-of-court balance sheet restructuring with a private equity firm, which injected new equity into business and kept several of existing lenders in capital structure as either debt or equity holders
  • Helped company stabilize cash flow while it determined its recapitalization options

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