Case Study – Plastico Limited
Major Bank relationship with significant facilities. ABL facility added on – ABL Lender uncomfortable. Despite Bank pressure, closely monitored. Owner/management erratic/eccentric. FD a ‘yes man’. Frequent stories of favours to get lenders onside. Huge amounts of cash taken out of the business, but generated via highly attractive working capital cycle (supplier terms very long). Multitude of facility operational issues noted. Messy. Very tight control consequently. Then Hurricane Katrina hit…
What Happened?
Supplier unable to supply, alternative suppliers offering poor terms comparatively, so cash dried up. Business failed very quickly, Administrators appointed. Prior to this, we had ensured the Credit Controller (rated) remained available.
Once Administrator in we engaged her directly and worked on sales ledger recovery. Intensive liaison with Administrator (poor recovery strategy) and Collector. Onsite for first two weeks to manage.
Continued close management and revised recovery strategy led to eventual full repayment with some surplus towards the Bank deficit (which was large – heavily unsecured).