When Viability Analysis is Necessary
- Is the company’s current operations and industry viable?
- What changes in sales, operations and/or expenses need to be made to make cash flow viable?
- Does collateral and assets viably cover lender’s exposure?
- Can current management formulate viable plan?
- Can current management communicate viable plan so lender can underwrite its risks?
- Can current management execute viable plan so lender can participate in company restructuring?
- Can the borrower afford 3rd party advisors? Can the lender afford not to have 3rd party advisors?
ARG’s Viability Analysis
- ARG quotes a fixed fee for a company specific Viability Analysis.
- Time to complete is 2 to 4 weeks depending on complexity.
- Provides borrower a concise plan for management and lender to make decisions with good information.
- Provides the lender confidence to underwrite the credit facility knowing that the cash flow and NOLV positions of their collateral provide adequate risk coverage.
Viability Analysis Components:
- Collateral, asset, liability, and fix charge audits.
- Projected balance sheet and P&L projections with quality measures for FCC and operating and balance sheet leverage.
- Detailed cash flow with sources and uses of cash.
- Detailed borrowing base with Loan To Value.
- Sales channel analysis of company and industry.
- Summary reporting with Quick Look and industry/company specific metrics such as sales psf or capacity utilization to fixed costs.
Viability Executive Summary and Cash Flow Model
- The executive summary highlights the cash flow model and quantifies the plan of restructuring.
- Provides a consensus benchmark to manage to, and the lender measures for progress and period to period risk mitigation.
- ARG will execute the plan with agreement from company and lender to rebuild the borrower’s viability.
- ARG will rebuild company’s viability for current lender, or will put together a deal book to get the deal refinanced with a new lender and/or raise capital.
ARG Viability Plan Execution Management
- ARG works with management on an as needed basis under an engagement contract that specifies the terms and purpose of the engagement.
- The Viability Analysis will have already included professional expense within its cash flow assumptions if 3rd party execution services are necessary.
- Typically with the comprehensive Viability Analysis already completed, ARG’s time at client after the initial reporting mechanisms are established is limited.
- ARG will remotely manage the company if possible. Sometimes the Viability Analysis will recommend personnel changes in order to execute the plan, and in these instances ARG will need to physically be present at the company until replacement personnel or procedures are in place.
- Lenders risk mitigates are constantly monitored by ARG throughout the restructuring process giving the confidence to lenders that the restructuring plan is being measured and met. Furthermore, that the Lender’s initial credit risk mitigates are still protecting the bank in a wind-down scenario.