Restructuring a debt-laden company
Situation
The company is one of the largest designs, trading and printing companies in Malaysia. It has been in this business for the last 15 years. At its peak, sales were about RM330 million a year. However, due to various reasons, sales declined rapidly to only about RM60 million a year. Existing loan from more than 10 local and foreign banks amounted to about RM230 million was eventually defaulted.
Actions / Challenges
The company appointed Leap Forth to restructure the bank borrowings. The given mandate was to negotiate with all the banks on the viable solutions to avoid winding up proceedings. The management’s main objective is to ensure full repayment of all bank loans in due course.
Leap Forth conducted an investigation into the causes of the decline in sales and hence the default. The main causes were due to changes of policy in the awarding of printing contracts, continuous increase in paper price and also the company was slow in adapting to changes in printing technology.
Basing on these findings and the significantly large loan outstanding of RM230 million (compared to the sales of RM60 million), it is agreed that the repayment of the facility is just not financially possible. After several discussions, the management decided to “exit” the business gradually. Meticulous planning and preparation over a period of 2 years were done to maximize returns.
Results
After 2 years (since the first default) of tough negotiations with the banks and other creditors, the company finally “gave up” and closed down. The few remaining assets were sold and distribution was done in accordance to the relevant legislations.
The company is one of the largest designs, trading and printing companies in Malaysia. It has been in this business for the last 15 years. At its peak, sales were about RM330 million a year. However, due to various reasons, sales declined rapidly to only about RM60 million a year. Existing loan from more than 10 local and foreign banks amounted to about RM230 million was eventually defaulted.
Actions / Challenges
The company appointed Leap Forth to restructure the bank borrowings. The given mandate was to negotiate with all the banks on the viable solutions to avoid winding up proceedings. The management’s main objective is to ensure full repayment of all bank loans in due course.
Leap Forth conducted an investigation into the causes of the decline in sales and hence the default. The main causes were due to changes of policy in the awarding of printing contracts, continuous increase in paper price and also the company was slow in adapting to changes in printing technology.
Basing on these findings and the significantly large loan outstanding of RM230 million (compared to the sales of RM60 million), it is agreed that the repayment of the facility is just not financially possible. After several discussions, the management decided to “exit” the business gradually. Meticulous planning and preparation over a period of 2 years were done to maximize returns.
Results
After 2 years (since the first default) of tough negotiations with the banks and other creditors, the company finally “gave up” and closed down. The few remaining assets were sold and distribution was done in accordance to the relevant legislations.
