with the bank for several years, but Wells had recently
transferred Prestige to its workout group and instructed
the company to find a replacement senior lender.
After Prestige approached us, we quickly learned
that finding a new senior lender was not the company’s only issue. Prestige was carrying significant debts
with its mezzanine lender and its private equity owner
and majority shareholder. With declining sales and a
considerable drop in EBITDA, Prestige was no longer
able to service its debt and remain in compliance with
its senior lender.
Our initial analysis revealed adequate collateral
coverage in both the company’s accounts receivable and capital equipment. As one of the premier
commercial laundry companies serving the New
York City hospitality industry, many of Prestige’s
receivables were from large, established hotel chains.
The machinery used for washing, drying, pressing
and folding linens for some of the biggest hotels in
Manhattan provided extensive fixed assets.
We plowed ahead. Our first objective was to provide
additional liquidity to help Prestige stabilize its operations. With a healthier cash flow, it could improve
sales and profits and also deal with some neglected
CAPEX and maintenance issues. But the company
also needed more liquidity to manage larger, more
fundamental problems with its capital structure, which
clearly had far too much leverage given the significant
reduction in EBITDA.
In business, it’s not uncommon for companies to experience cash flow issues linked to market conditions, declining sales, operational challenges
or other complex factors. In most cases, lenders are
tolerant of occasional disruptions. When cash flow
stress borders on debilitating, many senior lenders
rush to toss a company into workout, pursue a turnaround or even plunge into bankruptcy. But with a
little creativity, a lot of flexibility and the ability to see
beyond losses, a good lender can right the ship before
A recent deal Rosenthal & Rosenthal completed
for Prestige Industries is an example of a situation that
required a more creative approach. It turned out to be a
road filled with twists and turns, but we learned a few
important lessons along the way.
Prestige was looking to replace Wells Fargo, its current
senior working capital lender. The company had been
Taking the Road Less Traveled:
An Experienced Lender Choreographs a
BY ROBERT MILLER
When a distressed company approaches a lender for financing, it usually comes down to a black-and-
white decision: Will the company be able to repay the loan or not? In most cases, the lender doesn’t
become involved in the turnaround of a borrower. But Robert Miller relates a more nuanced story, showing
how a lender can take the road less traveled and provide more than financing to restore a failing company.
When cash flow stress borders on debilitating, many senior lenders
rush to toss a company into workout, pursue a turnaround or even
plunge into bankruptcy. But with a little creativity, a lot of flexibility
and the ability to see beyond losses, a good lender can right the ship
before it capsizes.
ROBER T MILLER
Head of Asset-Based
Lending, Rosenthal &