Home-Security Firm

The Situation

  • Provider of home-security installation and monitoring services with large branch offices in Pennsylvania, Texas, and California 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 the company funded with debt instead of equity

Role(s)

  • Balance sheet / Debt restructuring

The Work

  • Determined quickly after being engaged that an operating-company bankruptcy would be detrimental to the company’s revenue and would rapidly destroy the value of the estate, when ultimately the underlying problem of excessive leverage could be resolved out of court
  • In support of the eventual balance-sheet restructuring, the engagement team projected and managed liquidity under multiple proposed restructuring scenarios
  • Began preparations for the company’s bankruptcy as a defensive measure, including a potential holding-company bankruptcy in which the operating entities would be restructured out of court
  • Supported the company’s negotiations with over 15 members of the company’s lender group

The Results

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

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Overview

  • Retail
  • Restructuring and Turnaround

Engagement Team