After losing its largest customer, a waste company pivots with a new product offering, but development delays and inventory costs resulted in negative cash flow. They were forced to declare Chapter 11 bankruptcy to restructure operations and remain in business.
Financing Solution: Post-petition DIP Financing
Industry: Waste Management and Organic Material Recycling
Six-year old LLC with revenues of $10 million and 80 employees lost its largest customer due to a change in its customer’s business activity. The company developed an alternative revenue stream, but experienced negative cash flow of nearly $5 million caused by development time and inventory costs. During this time, their bank line of credit came due and the bank declared them in default. Their situation was further complicated by real estate holdings and equipment financed through a number of creditors. The company filed Chapter 11 bankruptcy to seek protection, and required debtor-in-possession financing, with the ultimate goal of restructuring to continue operations.
CFI was contacted by the client’s bankruptcy attorney on a Thursday. CFI’s inside counsel worked with the client’s bankruptcy counsel to facilitate a $1,000,000 accounts receivable financing line. Within three days the court approved the transaction and CFI provided immediate funding. A few months later the company was doing well and looking to refinance some existing equipment.
The company continues to operate and grow its new service line.