Avoiding the Unthinkable: How a $30M Manufacturer Escaped Liquidation
OVERVIEW
- Revenue: $30,000,000
- General Description: Injection Molding Manufacturer
- Geographic Location: United States and Mexico
- Markets Served: Automotive
THE SITUATION
A $30 million privately held injection molding company with operations in the United States and Mexico experienced a major disruption after a catastrophic fire destroyed a portion of its U.S. manufacturing facility. The fire severely impacted the company’s highest-margin, value-added operations, resulting in production interruptions and customer attrition as certain programs were resourced elsewhere.
As liquidity tightened, customer payment delays increased, and the company defaulted on multiple covenants under its senior secured credit facility. Compounding the situation, the family patriarch, who had provided an unlimited personal guarantee on the company’s debt, was considering a Chapter 11 bankruptcy filing as a potential path forward.
JACO Advisory Group was engaged as a turnaround leader to assess the viability of restructuring alternatives and advise ownership on next steps.
THE SOLUTION
JACO led a comprehensive operational and financial assessment of the business, including implementation of a 13-week cash flow forecast and a detailed liquidation analysis. Based on this work, JACO advised the family that a Chapter 11 restructuring was unlikely to be successful and that a Chapter 7 liquidation was a more likely outcome.
The analysis demonstrated that the senior secured lender’s collateral position was materially weaker than initially assumed and that enforcement of the personal guarantees was not a clear or efficient path to recovery. JACO shared these findings with the senior secured lender and presented a restructuring strategy that balanced certainty of recovery, timing, and execution risk–an approach that was acceptable to the lender.
The strategy enabled the lender to receive proceeds from the company’s business interruption insurance policy, materially reducing its exposure. In parallel, JACO worked collaboratively with ownership and legal counsel to execute a lender-approved note sale to a Canadian strategic buyer. The buyer was seeking a U.S. manufacturing footprint to mitigate tariff exposure and add capacity to meet increasing demand from its U.S. automotive customer base.
THE OUTCOME
The transaction averted a likely Chapter 7 liquidation and preserved the company’s operations. The senior secured lender achieved a 93% recovery, far exceeding the best-case liquidation scenario, while no recovery was pursued against the family’s personal guarantees. The business remained intact under new ownership, positioning it for renewed growth and success while saving approximately 165 jobs.
Facing Default or Liquidation? You May Have More Options Than You Think
Facing default, covenant violations, or an uncertain path forward? JACO Advisory Group helps manufacturers assess their options and execute the right strategy. Contact us for a confidential consultation today.
