Restructuring | Turnaround including judicial process and protection

CARGO AND OFF-ROAD VEHICLES

MONITORED TURNAROUND WITH LEGAL PROTECTION BY SHAREHOLDERS’ DEMAND

DEMAND: In the recession scenario of the 1980s, the largest Latin American cargo and off-road vehicles producer, was in a dramatic situation, with declining sales, rising costs and expenses and huge financial expenses caused by high interest on excessive indebtedness to financial institutions. To make things worse, most of these debts were due in less than 180 days! The controlling shareholder and directors were looking for a way out.

SOLUTION: After a detailed analysis and diagnosis of the holding company and its 9 subsidiaries, the consultancy team of Orchestra - Soluções Empresariais, outlined a strategic recovery plan, the so-called "Project R" - of "Restructuring" and "Recovery". It included ending competition between subsidiaries, specializing them by product line, introducing changes to the technical assistance network, rationalizing the organizational structure, centralizing planning, controlling and corporate policy at the holding company, renegotiating and extending the debits, etc. In summary, "Project R" aimed to cut costs and expenses, rationalize and dry the structure, reduce the number of factories and companies, decrease the need for working capital, free up assets to be sold, while obtaining a credit extension proportional to the capitalization brought by the plan as a whole. In view of the non-adherence and the unbearable pressure of some creditor banks, the plan required the use of a legal recovery protection process in force at the time – a sort of the American Chapter 11.

OUTCOME: "Project R" was fully and successfully implemented. Three factories were shut down and their properties sold. Inventories, costs and expenses have substantially reduced. The capital structure was strengthened. Production and sales remained stable while the workforce was reduced by 35% in quantity and 30% in cost. The economic and financial recovery brought profits back and the legal protection could be withdrawn before the legal term of 2 years. The holding company, as a publicly traded one, returned to its ability to launch shares to the public and restarted its growth, what happened also through new subsidiaries in association with international partners, being today a successful and strong corporation, as one of the world leaders in its sector.

ELECTRONICS MANUFACTURER

TURNAROUND OF COMPANY IN LEGAL REORGANIZATION AND PROTECTION, WITH PROFESSIONALIZATION, THROUGH INTERIM MANAGEMENT AT SHAREHOLDER INITIATIVE, INTENDING DIVESTITURE.

DEMAND: the largest shareholder of this electronic manufacturer that was already under legal reorganization protection requested help from the members of Orchestra - Soluções Empresariais to identify investors willing to acquire the company just by assuming their liabilities.

SOLUTION: After analyzing the company's situation, the M&A specialists on our team concluded that its sale was unlikely to be feasible in current status, in addition to the inconvenience of doing so at the moment, given the alternative and capacity for operational and value recovery.

As a result of a broad diagnosis, a strategic recovery plan was defined by Orchestra's legal and advisory team, which included the immediate removal of the controller and his children from executive functions, taking up positions on the created Crisis Management Board. In parallel, our team took over the management of the company as plenipotentiary "interim managers", to then implement non-existent procedures for planning, research, controls, systems, organization, supplies, etc. The structure was simplified and 250 people out of a total of 450 were dismissed in a pioneering way in Brazil with indemnities paid in installments, made in accordance to the union. New commercial structure was implemented with a 60% reduction in the product line, starting to produce only to order.          

OUTCOME: After 14 months of "interim management" by our team, the company returned to the command of its controlling shareholder, now as a market leader, with quadrupled sales, only 197 employees, high commitment and work morale, credit with suppliers, without bank debt and with a positive cash flow. Soon after the bankruptcy proceeding was closed and the company sold to a group of investors for US $ 4 MM in cash plus the assumption of the remaining liabilities, a substantial appreciation in relation to the “zero value”, recognized in writing by the controlling shareholder at the time of Orchestra involvement.