Energy Midstream

The Situation

Our client was an oil and gas midstream company with three (3) natural gas terminals, 10 crude oil terminals, and an internal transportation operation. Approximately 18 months prior to CR3’s engagement, the company’s working capital line had been utilized for partial financing to construct a new natural gas terminal, which would later prove to significantly reduce the client’s access to short-term financing. Shortly thereafter, the client implemented a new accounting system, which was not well integrated into the company’s existing operations. The client was running multiple profitability centers under a single income statement without recognizing divisional profitability. Eventually the lack of transparent financial reporting became a heated point of contention between our client and the existing lending institution. By the time CR3 was engaged, the client had tripped multiple loan covenants and had no access to the company’s existing line of credit. Reductions in the client’s borrowing base had caused the revolving line of credit to be over-advanced by $40m on a $60m facility.

Role(s)

Restructuring Advisor & Interim Officer

  • CRO – facilitated maximizing asset values in 363 sale process
  • FA – restructuring advisors

The Work

CR3 was recommended by the lender and engaged by the client to assist in potential restructuring needs. CR3 established a transparent cash budget and weekly reporting process. Having determined the highest value for the company would be achieved through an asset sale, CR3 led marketing efforts by retaining and working with an investment bank to expedite asset sales.

The Results

  • Accomplished an 85% return on capital, including current payments of interest and fees, on a fully non-performing loan for the primary secured lender;
  • Helped the client understand the severity of the existing situation and the need to take quick, decisive action to remedy the situation
  • Reestablished trust between the company and its lending institution by implementing control and transparency in the cash management process
  • Provided transparency on options most likely to maximize value while leading the client through the restructuring process
    • Pursued an out-of-court sale for the enterprise
    • Filed Chapter 11 and sold majority of company assets in an orderly 363 process

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Overview

  • Energy
  • Interim Management

Engagement Team