Insights & News

Lessons from 9/11: An Operating and Financing Playbook for a Challenging Environment



As the CFO of a $90 million company in September 2001, I found myself having to deal with the Special Assets Division (loan restructuring) of one of the country’s largest banks.

While our company was generating over $9 million in EBITDA (Pre-tax, Pre-debt service cash flow), the events of 9/11 had severely impacted our restaurant company with locations in traveler dependent cities like San Francisco, Honolulu and Las Vegas to name a few.

We broke several loan covenants and eventually found it difficult to cover all scheduled principal and interest on our senior debt as well as service an interest only subordinated debt loan.

In the months following the attack, our lender initially expressed a willingness to “work with and support all customers in these trying times and uncharted waters.” But it became clear that if we were to get any relief, we needed to grab the ball ourselves, start analyzing all aspects of our company and be prepared to present an “ask” that was based on logic.

Making a Plan

As the fall-out from COVID-19 continues, it appears that Federal and State governments are pulling a variety of “levers” to keep the economy going and provide economic assistance in a variety of ways. While willing to provide aid, it is not clear how quickly it might find its way to a local, privately held business and whether it might be in the form of loans, payroll tax credits or other vehicles. Hopefully the crisis will end quickly and things can reset to normal. If things take a little longer, many business owners may need to proactively engage their lender or at least be prepared for a call asking for updated financials, borrowing base calculations, etc.

It became clear that if we were to get any relief, we needed to grab the ball ourselves, start analyzing all aspects of our company and be prepared to present an “ask” that was based on logic.

From our experiences with 9/11 here are some steps business owners might take in putting together a ‘playbook” for working with lenders:

  1. Pull together a cash flow projection template: even though there is uncertainty as to how things might play out most business owners can directionally determine how much cushion they may have by identifying operating costs as fixed or variable as well as scheduled interest and principal payments and taxes. A 26 week rolling forecast is best, but if too complicated, at least do monthly.
  2. Identify your own potential levers that could reduce operating expenses: Based on the analysis above, analyze which costs can be reduced the quickest, which ones make the most dollar impact and which ones would most negatively impact company operations…and weigh them versus each other.
  3. Identify potential sources of cash: Take a hard look at inventories and be thinking about how cash might be generated. Even if raw materials or finished goods are sold at a loss, the cash that is generated might allow the company to continue operating in the near term. You can also generate cash if you can collect receivables faster than normal and convince a supplier/vendor to lengthen their term on payables.
  4. Determine what you might want from your lender: Depending on the bank’s corporate mandate, they may be willing to expand your credit line. If not, you might propose a period of abating debt service payments. If not, propose interest only for some time period and/or reamortizing the term of the debt.
  5. Back up your requests with numbers: “Help your banker help you” by providing a financial roadmap that incorporates the tactics described previously. Not only will that provide comfort to the banker that you’ve thought things through, but it will also give them something to eventually show regulators if they question why a loan was restructured.
  6. Underpromise and overdeliver: Provide realistic numbers to your lender and save some wiggle room. You don’t want them to agree to a plan and then be back asking for adjustments a month later.
  7. Think about alternative capital sources: If your current lender eventually starts implying that you should pay down the loan, be thinking of potential refinancing sources (such as the SBA) or equity investors (such as friends and family, customers or suppliers). These sources will also want to see your financial game plan, so if you’ve analyzed some of the areas discussed previously, you’ll be ahead of the game.

Here to Help

Our years of experience working with business owners and creating detailed financial models and financing memorandums can be valuable in the coming months. Our team includes CFOs, CFAs and MBAs that have experience in operations, restructuring, refinancing and working with Special Asset groups. Our staff of trained investment banking associates can provide in depth, granular financial statement analysis and projection scenarios to enable lenders and borrowers to make informed realistic decisions.

If you need additional bench strength to create an operating and financing playbook that will help you navigate these turbulent times, please do not hesitate to reach out to one of our Managing Directors below.

Andy Stockett: 423.266.6979

Chris Rowe: 423.266.4630

Ralph Montgomery: 404.644.2591


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