Home-Security Firm

The Situation

Our client is a $7 million recurring monthly revenue (RMR) provider of home-security installation and monitoring services with large branch offices in Pennsylvania, Texas, and California. The company was suffering from declining industry trends, significant one-time costs due to technology upgrades and higher debt-service costs as its leverage ratios increased, mostly due to an acquisition that the company funded with debt instead of equity.

Role(s)

  • Balance sheet / Debt restructuring

The Work

When we were initially engaged, there was a high likelihood that the client would need to file for bankruptcy in short order. However, upon further analysis and discussions with the management team, we instead concluded 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. In support of the eventual balance-sheet restructuring, we projected and managed liquidity under multiple proposed restructuring scenarios; we began preparations for the company’s bankruptcy as an emergency measure, including a potential holding-company bankruptcy in which the operating entities would be restructured out of court; we supported the company’s negotiations with over 15 members of the company’s lender group; and helped the company stabilize cash flow while it determined its recapitalization options.

The Results

After several standoffs between the first- and second-lien lenders and the company, it 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 as either debt or equity holders.


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Overview

  • Retail
  • Restructuring and Turnaround

Engagement Team