Textile Recycling Company

Textile Recycling Company

Roles
Chief Restructuring Officer
  • CRO of a multi-national recycling company
  • Identified strategic buyer
  • Operational restructuring of facility
CR3 was engaged as the CRO to a multi-facility international recycling company that was experiencing declining profitability due to increases in freight costs and a poor product mix from a new key supplier. CR3 assisted with the closure of two facilities that were cash flow negative, the sale of two facilities to a strategic buyer to pay down senior debt, and the operational restructuring of the last remaining facility.

The Situation

  • $50MM recycler of post-industrial waste textiles, operating out of two facilities in U.S. and three in Central America
  • Company faced three distinct issues that impacted its margins and liquidity:
    • Inability to pass through to customers higher international freight costs
    • Taking on new supplier that ultimately did not provide raw material product mix expected, resulting in unprofitable finished product mix
    • Cessation of raw material supply from another key supplier and clients reduced liquidity from first two issues prevented timely payment

The Work

  • Engaged by private equity sponsor as CRO to provide immediate assistance with restructuring efforts
  • Updated and refined weekly cash flow forecast and assisted with cash management
  • Managed accounting and treasury group after CFO left
  • Ceased business with supplier that was providing poor product mix
  • Due to lack of supply from two major suppliers and no new suppliers with sufficient replacement volumes, determined that two of its five facilities needed to be closed and third restructured
  • Initiated sale effort for remaining facilities to address continuing default and declining borrowing availability with its senior secured lender
  • Reported to Board, but interacted daily with senior management, including CEO and COO
  • Held frequent meetings with senior secured lender, Board, and private equity sponsor

The Results

  • Raw materials were either sold out of existing locations or moved to remaining locations and fixed assets were liquidated
  • Closed two international facilities; sold two U.S. facilities to strategic competitors with proceeds sufficient to pay off ABL lender in full
  • Third international facility had nearly 50% reduction on labor force and remains operational

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