March 2011
Welcome...
This year begins the fifth year of our newsletter and I want to thank all of you who have sent kind words of support and encouragement to us. A sample of some of our more notable assignments is the focus of this first newsletter of 2011. The past year was an interesting year for our firm as we continued to see activity in construction-related businesses and found a noticeable increase in fraud activity at many of the assignments we were involved with. Additionally, some thoughts on recent industry-wide discussions related to state and local governments are included as well. Later this spring we will be introducing a new website and blog which will allow us to communicate with you in a more timely and immediate manner. We will also be asking for your participation in a survey about our firm which will allow us to better serve you. We hope you find this article helpful, and we’d be pleased if you forward it to others who might be interested. For additional information on us, visit www.beaneassociates.com Sincerely,
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STATE GOVERNMENTS: THE NEXT WAVE OF BANKRUPTCY? By Tom Beane |
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While the Wall Street/Main Street contrast continues to draw attention, more than a few financial pros are wondering whether some state governments might be the next major sector of our economy to fall. Indeed, the thought prompted the Turnaround Management Association, of which I’m a member, to conduct a poll on whether Congress should consider passing legislation that would allow state governments to file for bankruptcy. The result: TMA members voted, by more than a 2-1 margin, against the idea. Supporters of the legislation, TMA reported, argued that being able to file for bankruptcy would enable states to get out from under debilitating debt loads and onerous union contracts without having to request a federal bailout. Opponents, who came out well ahead in this poll, contended that letting states file for bankruptcy would merely shift the burden for their debts onto the federal government. The survey even drew the attention of the Wall Street Journal, which interviewed former TMA President Patrick Lagrange. “At the end of the day, Chapter 9 is not going to be something that replaces hard political choices that need to be made,” Lagrange told the newspaper. He also said he doubted it was possible to engineer a bankruptcy law capable of fully encompassing “all of the complexities at the state level.” The hard political choices to which Lagrange refers include reducing services and raising taxes. It doesn’t have to be all of one and none of the other. If you’ve looked at the containers of ice cream in the supermarket lately, you’ve no doubt noticed that they’re smaller and cost more than they used to. That may be the best recipe for state governments to get their finances back in line. The challenge will be to find the right balance. To view additional articles, please go to:
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If you take a look at Wall Street, it seems like the economy, if not booming, is at least once again rolling steadily forward. But we know the recovery hasn’t taken hold in all economic sectors, and the distressing number of vacant storefronts in small towns and strip malls tells us that Main Street is still feeling the pain.Modular Building Manufacturer: Turnaround
Situation: A $10 million manufacturer of modular homes and buildings sold regionally was asked by the secured lending group to hire a turnaround consultant and provide the group with a plan to return to profitability and restructure the debt.
Result: The company hired us to assist in developing a revitalization plan to present to its lending institutions. The plan included business strategies to increase revenues, reduce costs and potentially restructure the current debt structure. Our recommendations instituted cash controls, increased cash infusion by selling unneeded assets, and restructuring the company for sale, merger or partnership.
Lender to Real Estate Developer: Liquidation
Situation: $45 million company created by its housing industry parent for the sole purpose of funding real estate developers.
Result: The secured lender group hired Beane Associates, Inc. to provide an opinion of the loan portfolio. Due to the volatile housing and lumber markets, the decision was made to orderly wind-down the business. Over 10 weeks, we worked to maximize return for the bank group.
Assisted Living Facilities: Bankruptcy advisor/expert witness
Situation: Secured creditor retained Beane Associates, Inc. to examine the books and records of three debtors-in-possession to establish whether secured creditor’s collateral was properly managed by its ownership and management team.
Result: Within a three-week window prior to a federal hearing, Beane Associates, Inc. confirmed multiple instances of funds diversion as liquidated proceeds were directed to meet the working capital needs of surviving entities. We testified as an expert witness to support findings and were instrumental in assisting the secured creditor in having a trustee appointed.
Automobile Dealership: Advisory
Situation: A $20 million foreign and domestic automobile dealership with multiple locations was undergoing extremely stressful times due to the downturn experienced by automobile manufacturers. This resulted in a significant out of trust position.
Result:The secured lender hired Beane Associates, Inc. to re-establish stability and to ensure the delinquencies ceased. Initial auditing of the books and records was completed to verify non-fraudulent activity. Weekly visits stabilized operations and ensured on-time payments for newly sold vehicles. After being returned to a positive position, the dealership was sold.
Private Jet Charter and Maintenance Company: Advisory
Situation: A $500 million private aviation business specializing in jet aircraft management and Part 135 charter operations built via acquisitions and mergers. The business was unable to consolidate its operations with synergy and failed consistently to produce timely financial reports and raise new equity, resulting in significant losses.
Result: The secured creditor retained Beane Associates, Inc. to oversee a schedule of liquidity events, including the sale of facilities and equipment, and collection of outstanding accounts receivable.
Specialty Private School: Refinance
Situation: A school for teenage behavior modification experienced a large drop in enrollment due to a one-time situation out of their control. As a result the secured lender asked the school to find alternate financing within six months.
Result: The school tried unsuccessfully to refinance with local institutions. The school then hired us to assist with the refinance and within one month we provided the school with a letter of commitment from a qualified lending institution.
Fuel Tank Inspection and Repair: Advisory
Situation: When a private equity group could not get timely, accurate and relevant financial information from a portfolio company, it asked Beane Associates, Inc. to determine why.
Result: We determined that the company staffed key positions with underqualified personnel. This stunted the company’s reporting capability, undermining any solution a software application could provide. We laid out a tiered framework for ownership that acknowledged cost constraints but still addressed information needs of decision-makers.
Founded in 1984, Beane Associates, Inc. continues to build an impressive track record in helping private and publicly owned companies improve operational effectiveness and profitability during a time of financial challenge. The company has offices in Wilmington, DE, and Atlanta, GA.
Phone: 302.479.5438 Fax: 302.479.5434
