Focus Management Group

Agriculture Industry Experience

Ethanol Producer & Wholesale Distributor

Company:

The Company was a 60Mgpy producer and wholesale distributor of ethanol and ethanol by-products.

Situation:

Gasoline prices (RBOB) experienced a rapid and dramatic decline during the 2nd half of 2008.  Since there was no equal and offsetting rapid and dramatic decline in the Company’s procurement cost of corn and natural gas, the Company experienced a sharp decline in the demand for - and net sales price of - its ethanol. This significantly reduced the Company’s revenue, gross profit and operational profitability which caused it to be in default of its debt service financial covenants with its Lender.

Focus Scope:

At the request of its Lender, the Company hired Focus Management Group to perform an assessment of the business.

Tasks Performed:

  • Analyzed the Company’s business operations and financial statements from a bottom-up perspective and identified those problems, practices and issues affecting the Company’s revenue, cost of  revenue and operational profitability
  • Prepared various 26-week cash flow forecasting models under multiple ethanol production levels  (40, 44, 50 & 60Mgpy) utilizing (i) varying net sale price assumptions for ethanol and (ii) varying procurement cost assumptions for the Company’s primary raw materials (corn and natural gas), to determine optimum  ethanol production levels for the Company at specific net sale price assumptions
  • Reviewed Company’s loan agreements, and determined potential restructuring options with a view to better aligning debt service requirements with Company’s anticipated cash flow capabilities
  • Assisted Company in negotiations with its incumbent lender with respect to restructuring of its current debt obligations

Results:

As a result of Focus’ analysis, the Company and Lender agreed to a debt restructuring plan that enabled the Company to continue its operations uninterrupted.

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