Rail Manufacturer

Rail Manufacturer

Roles
Financial Advisor
  • Reduced the loan balance
  • Refinanced with a new lender 
  • Margins increase by 600 bps 
  • Businesses were retained by the family

The company was a third-generation, family-run business engaged in the design, manufacturing, installation, and maintenance of track components and systems for all classes of railroads and industrial facilities. The business grew to $120MM in revenue and $8MM in EBITDA and the company’s asset-based lender supported expansion efforts by increasing its line of credit. The business was in violation of several loan covenants. A CR3 professional was engaged to develop and helped implement inventory liquidation plans and manufacturing improvement processes. Results included minimized dilution of accounts receivable, raised cash, scaled headcount, and improved operation margins. Though under a different structure, the businesses were retained by the family.

The Situation

  • Third-generation, family-run company that designed, manufactured, installed, and maintained track components and systems for railroads and industrial facilities
  • Business grew revenue to $120MM and EBITDA $8MM – significant portions of each generated via joint a venture to remove and resell scrap rail for Class 1 railroad operators
  • Company’s ABL supported expansion by increasing line of credit from $20MM to $35MM to accommodate increased working capital, growing outstandings to $33MM

The Work

  • CR3 professional served as Financial Advisor as business was in violation of several loan covenants and eight-month EBITDA was ($2MM) - decrease in EBITDA caused by failure of joint venture, onerous contracts, and a $5MM+ inventory write-down
  • Developed and helped implement a plan to shutter the scrap business and liquidate the inventory and associated equipment from numerous scrap yards around the country
  • Led negotiations with customers to transfer contracts to new service providers and minimized dilution of accounts receivable
  • Developed inventory control and standard cost processes and procedures for the manufacturing group and trained the staff
  • Formulated and executed a strategy which saw the assets of the construction business sold to another family entity in order to raise cash
  • Scaled headcount to reflect the new level of operations and installed a new president for manufacturing

The Results

  • Proceeds from the liquidation of inventory, transfer of contracts, asset sales and collection of accounts receivable reduced the loan balance to $8MM
  • Manufacturing business was refinanced with a new lender as a standalone concern
  • Remaining manufacturing operation saw margins increase by 600 bps by the time of the refinancing and service levels were measurably better
  • Though under a different structure, the businesses were retained by the family

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