Case Study #1

Company Profile

  • Company has raised $90 million from venture capitalists through three rounds of financing.
  • The most recent financing occurred 18 months prior to Sherwood’s involvement.
  • Company develops a hardware product that has a potentially broad market.

Financial Situation

  • Company has $1.2 in cash and $15 million in debt.
  • Company has outstanding Accounts Receivable of $1.8 million.
  • The product is becoming increasingly commoditized; therefore gross margins are very tight.
  • Sales are decreasing as customers experienced significant financial challenges due to the downturn in the technology market.
  • Company owes $9 million to a secured lender who has a perfected security interest in all assets of the Company.
  • Company has lease obligations and trade payables of $6 million.
  • Future venture-backed funding opportunities are non-existent.

Sherwood Mandate

  • Negotiate forbearance from the secured creditor so that the
  • Company would have time to implement new sales strategies.
  • Reduce the Company’s debt obligations to leaseholders and trade payables.
  • Initiate corporate and management review and report findings to Board.

Results

  • Sherwood restructured the Company’s loan Agreement with its secured creditor. The secured creditor agreed to accept interest only payments for a six-month time period and reduced the monthly principal payment for a six-month period by 65%. The payback period was extended, allowing for reduced monthly payments for the length of the obligation.
  • Sherwood negotiated amendments to the Company’s leases with its landlords. The amendments reduced the rentable square footage from 85,000 square feet to under 20,000 square feet.
  • Sherwood sought forbearances from equipment leaseholders and trade vendors. Eventually, debt obligations were settled at substantial discounts.
  • The reduced payments resolved the Company’s liquidity crisis and provided additional runway to implement its strategies
    The corporate and management review was delivered to the Board of Directors as Sherwood reengineered the company.