Case Study:
Non-GMO & Organic Grain Distributor to Pacific Rim Countries
Grain Distributor was found to be in a material over advance position after financial reporting errors were discovered by a new CFO.
Company had developed a program of high quality Organic & Non-GMO soybean seeds and a strong farmer network to serve very demanding international markets. However, it had significant turnover in its CFO position, weak operative and financial controls and poor management reporting, especially in its hedging program where losses went undiscovered.
In addition to the Company being in violation of financial reporting and financial covenant requirements under its credit agreement with Bank of America, it was in a multimillion dollar over advance position on its revolver. The business environment was further complicated by the strained relationship between the founder and his high-profile international equity partner. Harney was challenged with validating the Company’s true financial condition, the source of the losses, the viability of the business itself and if viable, providing a plan to salvage value within the business.
The Solution
Reviewed historical borrowing bases & found numerous errors & inconsistencies, but also opportunities to enhance value.
Prioritized and immediately brought clarity to BofA’s risk position to stave off potential foreclosure action and to foster constructive dialogue.
Validated the profit potential within the upcoming (record) harvest by verifying the contractual spread between payments to growers and receipts from customers.
Identified sources of margin degradation, operating risk and waste requiring the development and implementation of significantly improved discipline and controls over the contracting process with customers and suppliers.
Created a dynamic financial model to illustrate and then mitigate harvest funding needs through a grower cooperative initiative that delayed delivery and/or title transfer of the crop through storage rental.
Supported the Company’s efforts to find a replacement lender and with managing the current lending relationship during the refinancing process.
The Results
Brought stability and credibility to data while improving the accuracy and timeliness of financial and management reporting.
Proved that with proper margin management and operative oversight that the Company was quite viable and able to exit forbearance.
Engineered an alignment between the owners and BofA that funded the harvest with precision in execution and reporting.
Enhanced liquidity by securing credit insurance on millions of dollars in AR, a new SOP for all future sales.
Repaid BofA working capital line and equipment leases in full and avoided a forced liquidation of their collateral.
Services & Roles
Turnaround and Restructuring
Chief Restructuring Officer
Financial Advisory
*Some engagements may have been performed by team prior to joining Harney Partners.
