Unfortunately, many companies face financial issues that require outside support at some point. And more often than not, they wait until the situation is critical to engage a turnaround professional to get ahead of the issue. But declining earnings, weakened financial ratios and covenants, erosion of cash flow, over-reliance on credit, deferring capital investments and salary increases, and insufficient resources to service debt are warning signs of distress and deeper operational issues. Ultimately, these issues will typically result in flight risk of lenders, employees, vendors, and other key stakeholders, leaving a company in dire circumstances.
Companies in distress require assistance to assess the situation and determine a strategy – whether that’s insolvency or turnaround and restructuring, or turnaround and restructuring and selling. By engaging a Certified Turnaround Professional, companies can assess the damage and formulate an evidence-based plan to save the business. However, companies seeking advice on the business’ potential to continue must be willing to change, they must know there’s a problem and want the help needed to fix it.
Upon engagement, Fries Financial meets with key decision makers to ensure a comprehensive understanding of the business, its financials and operations. At this meeting, Randy explains the situation from the bank’s perspective: what it means to be in special loans, how the special loans personnel think, and how to deal with them, and how to find a new lender (if needed). From there, Randy meets with the bank to ascertain what the lender needs to regain confidence and continue the relationship. While Fries Financial is hired by the company and working in its best interests, we remain true to our independence in working transparently with both companies and lenders with the goal of re-establishing a trusting relationship. The lender sets the timelines and requires a detailed report, similar to a proposal, that outlines the budget and schedule for operational and financial restructuring, including assumptions, options, scenarios, and milestones.
Typically, part of the turnaround and restructuring plan is asking the lender for more funds or more time, so the report must sell the plan to the lender, clearly articulating the bank’s role in the plan, to earn approval. Often the plan involves reductions in staff, foreign operations, and assets as well as negotiating debt restructuring. The lender will either approve the plan or ask for a forbearance agreement, which ensures that the company executes the plan by engaging a third party (typically the consultant already engaged by the client) to act as a T3 Restructuring Officer. However, in cases where the lender doesn’t require a T3 Restructuring Officer, the company may choose to hire a Chief Restructuring Officer or Interim Chief Financial Officer to assist with the plan’s execution.
Fries Financial Consulting Ltd. provides Chief Restructuring Officer and Chief Financial Officer services on a part time and/or interim basis to assist in obtaining financing; setting up systems, policies and procedures; and operational guidance.