Alvarez & Marsal Receives Two TMA Awards
Alvarez & Marsal (A&M) has been honored with the 2012 Turnaround of the Year (Large Company Category) and Transaction of the Year (Large Company Category) Awards presented by the Turnaround Management Association for its work with Harry & David (H&D) and Aquilex Holdings.
After years of declining sales and margins, H&D faced severe doubts about its future and, over the course of December 2010 and January 2011, hired Rothschild, Jones Day and Alvarez & Marsal with A&M assuming several interim management roles including CEO/CRO, CFO and treasurer. The restructuring team achieved a pre-negotiated deal whereby bondholders agreed to convert $198 million in bonds to equity and provided $55 million in DIP financing and exit financing in the form of new equity. As a result, H&D emerged from bankruptcy less than six months after filing with no long-term debt and a strong foundation for the future.
H&D’s operational turnaround was fueled by successful execution of a number of key initiatives to simplify and improve the assortment, consolidate the vendor base, and negotiate contracts and pre-petition claims to reduce costs and enhance liquidity. Disciplined demand planning and promotional strategies further improved margins, budgeting and cash management mechanisms were implemented, and working capital efficiencies were bolstered by focusing on inventory productivity and purchasing discipline. Enabling the turnaround required recognizing the H&D employee base as a critical strength, and a number of organizational re-alignments were implemented and a large portion of the call center operations were brought back in-house. Over the course of the A&M management team’s year-long tenure through H&D’s key holiday selling season, trailing 12-month EBITDA improved by $37 million, with single-digit % comp revenue increases, and a 40% reduction in calendar year-end inventory and A/R. Overall, 2,015 full time and 5,295 seasonal jobs were saved. A&M professionals involved in the engagement included: Kay Hong, David Charne, Paul Kosturos and Rob Montgomery.
For Aquilex Holdings, a provider of maintenance, repair, overhaul, and industrial cleaning solutions to the energy industry in the United States and Europe, A&M served as a financial advisor working closely with Weil, Gotshal & Manges, Rothschild, Kirkland & Ellis, Richards, Layton & Finger, Latham & Watkins, Zolfo Cooper, Centerbridge Partners and Stroock & Stroock to restructure the company’s debt obligations and obtain additional liquidity sources. As Aquilex began to experience a significant decline in revenues and earnings, the company entered into a forbearance agreement followed by a restructuring support agreement (RSA) designed to reduce debt by approximately $322 million and infuse Aquilex with an additional $80 million of new equity. Under the terms of the RSA, the goal of the parties was to implement the restructuring through a voluntary exchange offer. A&M’s Lawrence Hirsh, along with John Makuch, helped to reduce the company’s outstanding debt by 70% and reduce the debt service costs by 69%, which resulted in positively resolving Aquilex Holdings’ difficult financial position out-of-court with significant liquidity to operate. In parallel, A&M’s David Riviere, along with Ben Taylor, Hank Ackerman and Dan Phillips, led a team focused on performance improvement. The company was challenged to accurately forecast financial and operations results, plan and execute operations and had little actionable visibility into profitability. In addition to delivering sustainable processes and tools to address these issues, the team drove over $3 million in annual margin improvements during the transaction process.
A&M has been honored numerous times by the Turnaround Management Association, the only international non-profit association dedicated to corporate renewal and turnaround management. A&M’s award-winning engagements include: Chemtura, Rossignol, The Warnaco Group, AMERCO, Spiegel, Inc., Treofan Germany GmbH, and Ihr Platz GmbH & Co.