OCTG Manufacturer and Distributor
The Situation
The company is a leading manufacturer and supplier of oil country tubular goods (OCTG) to the petroleum industry with products including casing, tubing, couplings, production accessories, drill pipes, drill collars, and drill-string accessories. The company suffered significant losses in volume and margin after the decline in oil prices in 2014. The downturn continued into 2016 as the company grappled with high levels of high-cost inventory and was left facing both financial covenant defaults and availability constraints under its existing ABL facility.
Role(s)
- Financial Advisor
The Work
CR3 was engaged to serve as financial advisor to the company and negotiated multiple forbearances with the lender, assisted with asset sales and inventory appraisals, prepared multiple scenario-driven financial models, engaged in discussion with trade vendors and contacted potential lenders for refinancing options. Additionally, CR3 spent a significant amount of time managing the company’s relationship with the secured lenders, as well as with trade vendors with past-due balances.
The Results
CR3 oversaw operational improvements that, coupled with the improving economic environment, yielded higher oil prices and rig counts, resulting in EBITDA improving from losses of ($14.4MM) in 2016 to earnings of $10.8MM in 2017. Inventory was reduced and generated enough proceeds to, senior lender debt to $15MM from $50MM. Extended trade payables of $10MM that the company owed its vendors were settled with payment plans that allowed the company to service obligations over 12 months, all of which were satisfied as of October 2018. In addition, CR3 identified options for replacement capital and assisted with the refinancing of the ABL facility to a new lender.