Case Study in Lender Services: Collateral Preservation

Background

Retained by a publicly traded Northeast based financial services company to provide its commercial work out division with oversight of borrower – directed going out of business sale.

Need

The bank borrower presented no plan for winding down multiple store locations.  There was no budget detailing duration of the sale process, sale proceeds to be generated, employee, lease, utility and product costs necessary to support the sale and finally net proceeds available to apply to the bank’s loans.

Process (Diagnostic)

Working with the business owner developed a 120 day cash budget.   The forecast, organized by store location, detailed sales receipts with accompanying labor, occupancy, utility, insurance and cost of goods for each location.  Sales & register journals were reported daily to monitor both cash and credit cards transactions and cross checked to the bank accounts.  Check register was reviewed daily to monitor check float and necessary expenditures to support the GOB.  

Result

This was a win-win for both the borrower and the bank.  The bank obtained the visibility it needed to ensure its collateral position was not eroding while ensuring cash collateral being spent was both necessary with the balance repaying its loans.  The business owner learned who needed to be paid, when and the importance of minimizing his exposure from the personal guarantee the bank held.