The challenge permalink
Our client was an aviation services company that provided maintenance, modification and overhaul for large transport aircraft both military and commercial. The company was not asset-heavy, mostly selling labor. There were defense contract issues with the largest contract, with the government withholding $75MM of company’s payments, and the cash flow was not sufficient to maintain other business lines. The company’s balance sheet was undercapitalized.
We worked with the company to understand their true cash need and proper capital structure.
The Virtuoso approach permalink
Our team dug into the contract issue and assisted the company in pursuing a request for equitable adjustment (REA) with the Department of Defense. We arranged $15MM subordinated debt for the company and refinanced existing debt, which closed the gap in cash need prior to reimbursement of funds from the military contract. (Subordinated debt is more expensive than senior but much less than equity.) In addition, we adequately capitalized the balance sheet and lowered the overall cost of current debt with new covenants.
The results permalink
- Allowed company’s owners to maintain their ownership stake
- Gave the company an adequate cash cushion to work through their large contract issue
- Increased revenue from $120MM to $200MM
- Increased EBITDA from negative $45MM to positive $20MM
Now is the Time permalink
Virtuoso Strategic Group is a boutique consulting firm formed to deliver extraordinary value to its clients. We pride ourselves on alignment with the fortunes of our clients and an unwavering commitment to their success. We welcome you to start the conversation today.