Executive Summary
Instead of moving into court, the company used a disciplined out-of-court workout. CMBG aligned the lender, addressed vendor pressure, and paired the liability-side reset with operating changes that returned the business to break-even within five months.
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Situation
The company was a regional distributor of restaurant equipment that entered distress after COVID-related disruption weakened demand patterns, stressed margins, and tripped lender covenants.
The lender was prepared to push for tighter control, and trade creditors were increasingly anxious about payment timing. The question was whether the business could be stabilized through a negotiated workout before the situation escalated into litigation or a formal insolvency process.
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Key Facts
The core challenge was aligning lender relief, vendor confidence, and operating execution on the same timeline.
Primary Pressure
Loan covenant breaches and vendor pressure
Trade Payables
$3 million restructured
Court Involvement
None
Operating Result
Break-even in 5 months
Catalyst
COVID-related disruption
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Workout Structure
CMBG negotiated a forbearance agreement with the lender to create breathing room and avoid an immediate enforcement scenario.
At the same time, we helped restructure roughly $3 million in payables so the company could continue operating without a constant cascade of vendor-side disruption.
- Negotiated lender forbearance to preserve time and optionality.
- Restructured trade payables to reduce immediate creditor pressure.
- Created a clearer short-term operating and liquidity framework.
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Operational Reset
The capital-side workout only mattered if the company could also change the operating pattern that caused the losses. CMBG helped implement practical operating changes focused on discipline, visibility, and faster accountability.
- Improved cash visibility and near-term decision control.
- Prioritized vendor and customer relationships that were essential to continuity.
- Linked management execution to a short-cycle performance cadence.
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Result
The business returned to break-even within five months, giving stakeholders a materially better outcome than a rushed court filing or disorderly vendor collapse would have produced.
The company avoided court intervention entirely and used the workout period to regain operating stability rather than simply delay failure.
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Key Takeaways
- A covenant default does not automatically require a court process if the lender can be aligned around a credible short-term plan.
- Vendor pressure and lender pressure need to be solved together, not sequentially.
- An out-of-court workout only works when operational changes are implemented fast enough to justify the added time.