Litton
Microwave Products of America (f/k/a: Litton Microwave)
Situation: Chapter 11 (failed leveraged buyout) – assets dissipating
Outcome: Stopped free-fall; restored viability; sold assets back to Litton Industries in full settlement of claims; settled secured claims at 100¢ and unsecured claims at 70¢; emerged debt free.
Role: TBG appointed DIP – CRO, CEO, CFO, COO – duration: 2 ½ years
State of Affairs: Private spin-off defaulted immediately; sought Chapter 11 protection; creditors claiming fraud, self-dealing; $1.5M monthly cash burn; no credit facility; no plan; Japanese and Korean competitors undercutting prices by 85%; creditors looking at zero-to-12¢ recovery – assets quickly dissipating.
Proximate Cause of Failure: Parent deemed business strategic non-fit and starved capital support; sold failing business facing fierce foreign competition to novice business group lacking proper capitalization and no substantive operating plan; management team was fleeing; no leadership; business in free-fall.
Fix:
- Installed interim CRO, CEO, COO, CFO; assessed, streamlined & recruited new, seasoned senior management team.
Result: Stabilized organization and provided leadership.
- Identified core competencies and viable core business.
- Developed, obtained creditor and court approval to immediately implement emergency plan to jettison consumer microwave segment (negative gross margins) and sell off large inventories.
Result: Stopped negative cash flow - generated substantial cash.
- Consolidated and quickly downsized; renegotiated performance-based labor contract & changed work rules; defined and installed proper metrics to become dominant commercial microwave manufacturer.
Result: Dramatically reduced breakeven and generated positive cash flow, yielding a sustainable core business.
- Negotiated and developed Plan of Reorganization to sell assets back to Litton Industries generating sufficient cash (along with cash from sell-off of consumer microwave inventory) to obtain approval, confirmation and emergence from bankruptcy.
Result: Yielded 100¢ on the dollar for secured creditors and 70¢ for unsecured creditors.
- Developed successor management team