Serving as CRO and Providing Restructuring & Bankruptcy Advisory
The Situation
An operator and franchisor of fast casual restaurants specializing in coastal Mexican food, with approximately 170 locations on the West Coast, was encountering significant liquidity, operational and customer dining issues as a result of the pandemic and underperforming units. Mackinac Partners (acquired by Accordion in 2021) was engaged as financial advisor, and subsequently engaged as CRO to help the Company address key operational, liquidity, and restructuring priorities.
Services
Interim CRO
Restructuring & Bankruptcy Advisory
Liquidity Management
Performance Improvement
The Execution
- Assessed business performance, store/unit level financials, and developed a 13-week cash flow model to identify desired outputs and scenario flexibility.
- Supported weekly reporting and re-forecasting of cash flows and developed scenarios to show operating performance and credit statistics under various economic and capital structure scenarios.
- Reviewed existing operations to understand the implications of COVID-driven operating changes on the business and to identify opportunities to reduce costs – including a review of material contracts, infrastructure, and overhead.
- Provided recommendations on whether the company should reject contracts (if applicable) and benchmarks for savings achieved in other situations for common expenses.
- Developed key employee retention and incentive plans.
- Classified units as Green, Yellow and Red to determine re-opening strategies. Reviewed performance of re-opened units, identified key performance drivers and developed benchmarks for future re-openings.
- Supported management in setting target savings goals by unit and tracking cost/benefit of potential concession deals.
- Assisted the debtors and counsel in negotiating with the lenders and investors in the restructuring of their balance sheet and right sizing their operational footprint, the terms of debtor in possession financing, and the terms of a $10M equity investment by the investor. These negotiations resulted in the preparation of the pre-packaged Chapter 11 plan of reorganization and a successful filing.
The Results
Our team helped the Company successfully navigate the impacts of COVID on their business operations. The Company emerged from the Chapter 11 process after 65 days with a strengthened capital structure, improved financial stability, and enhanced liquidity to support continued operation of its restaurants. Through the reorganization process, the Company achieved a significantly improved balance sheet, reducing secured debt by more than $35M and raising $13M in new long-term financing and equity capital from its prepetition secured lender and its equity sponsor. Additionally, the Company strengthened its operations and optimized its footprint with 157 go-forward units, closing 36 units during the year, and reducing rent expense by approximately 10%.