The client is an owner and operator of composting facilities and anaerobic digesters that accept organic waste from municipalities across North America. Customers include the municipalities as well as retailers for the branded mulch and fertilizer generated from the company’s facilities. The company’s EBITDA declined significantly as its Canadian subsidiary operated with below-market sales contracts was forced by regulation to reduce the height of its compost piles and recently mothballed a facility in response to odor complaints.
We were retained by the company’s Canadian subsidiary to project and manage cash flows for three local facilities, evaluate current operations and help formulate long-term strategic options for the business. We projected cash flows for the subsidiary; created and supported the company and its understaffed finance team in executing payment plans on vendors’ past-due balances; projected the long-term cash-flow needs of the business, which required significant new investment in capital after years of underinvestment; and provided analytical support to the parent company’s management team during its negotiations with its debt and equity providers to restructure the balance sheet.
The company successfully restructured its balance sheet and, with CR3’s assistance, developed a rehabilitation plan to secure funding for and manage the cash flow of the Canadian subsidiary. After the company raised prices by over 50% on its municipal customers and lost only minimal volume, the company’s equity partner agreed to provide funding to the Canadian subsidiary in order to invest in its long-term prospects.