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The Client

A privately-held and founder-led hospitality/lifestyle destination travel club found itself in need of capital, as well as a new business model that would yield more return for the company.

The Problem

The founders of the Company proved unprepared to account for the Company’s rapid growth, as well as the effects of increased cost that inevitably accompanied it.

As growth continued, issues in the finance department eventually escalated to the point where the senior financial officers resigned their positions due to ignored warnings of the Company’s imminent crisis. The staff that remained was inexperienced and lacked the proper vision and accountability that was required to adequately solve the Company’s financial difficulties.

In the absence of a CFO and senior staff, the finance department was headed by the founders’ junior confidant who proved to be too unfamiliar with the forecasting, financial statement preparation, compliance and reporting requirements involved to effectively manage the department.

As result of the mounting problems, the Company was losing money year over year. It had fully drawn on their existing bank facility and was in default.

Challenge Accepted

In desperate need of a new business strategy, as well as additional capital to help fund operating disbursements that included payroll, the Company retained a Challenger Advisors consultant to help navigate through the transitions.

Within the first three days, the existing lenders were convinced to extend additional credit to the Company to pay the immediate operating requirements that were necessary to keep the business from collapsing. Assuming the role as the Company’s M&A advisor, the process was begun to:

    • Building a weekly cash flow forecast and a 5-year financial forecast
    • Preparing the Company for a bankruptcy filing
    • Preparing a Debtor-In-Possession (DIP) Budget
    • Searching for a replacement DIP facility for over $80 Million
    • Assuming the management of the Company’s finance department

In risk of depleting all the Company’s funds, the entire processes had a strict timetable of six months.

The Results

Challenger Advisors’ extensive experience in Turnaround Management can help achieve results that go beyond initial expectations. Despite the complex and unstable situation, the Company executed a plan that proved to have the most beneficial outcome for all interested parties, which included overhauling the finance department to improve quality of work, cost control and accountability. This enabled the Company to improve overall financial and administrative performance, which led to the successful sale of the Company.

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