• The Company made significant capital investments in long-term strategic assets, financed largely with term debt.
• Sales declined 50% with the economic downturn, resulting in significant operating losses and the inability to fund required debt service
• Fort Dearborn was initially engaged to assist the Company with an assessment of its strategic alternatives together with the preparation of a turnaround and debt reduction plan.
• During FDP’s due diligence review of the Company’s financial records, we identified a number of accounting issues & irregularities including:
• Overstated profits due to improper inventory valuation methods and understated bad debts due to poor controls and lack of consistent policies
• Distorting divisional profitability due to improper allocation of costs among divisions
• Overstatement of accounts receivable to inflate the Company’s borrowing base
• Poor performance and ownership/management inability to implement the debt reduction and turnaround plan resulted in the bank group insisting that FDP be hired as Chief Restructuring Officer.