Background: A company organized and operating outside of New York state had a factoring relationship with outstanding A/R of approx. $20 million, one of the factor's largest credit facilities. The factor had a perfected first position security interest in all assets of the company and, other than its A/R, the company had no other significant assets. Factor learned subsequently that the company had 6 different outstanding stacked MCA loans from 5 different MCAs, including a total MCA debt of principal and interest of nearly $6 million.
Strategy: Following a referral to the company from the Factor, in less than 30 days following engagement as the company's restructuring officer, MCA Stacking Solutions, working with the CEO and CFO of the company, formulated and implemented a plan of action that included:
Resolution: Following nearly a year from the time daily debits were cut off, without any further payments to the
MCAs in the interim, MCA Stacking Solutions was able to achieve a global settlement with all 5 MCAs for a total payout by the company of $1.3 million.
Background: A North American distributor of finished goods to more than 7,000 retail locations in the US, Canada, and Mexico incurred significant cash flow issues resulting from the COVID-19 pandemic. The company’s offshore manufacturer was unable to ship product and the retailers were shut down for several months as they were not in an essential goods industry. The company had a factoring relationship, however, its sales shrunk by more than 72% resulting from these events, so in order to stay in business it turned to the MCA world and took out 2 MCA loans and was paying interest on the debt far in excess of 100%. The factor referred the company to MCA Stacking Solutions.
Strategy: MCA Stacking Solutions, from its vast industry knowledge, knew that it was likely that the MCAs would take a significant haircut on the amount of its debt if the company was able to pay a one-time lump sum in order to pay off the debt in its entirety, which is typically attractive to the MCAs rather than receiving reduced or no payments and extending the timeline for repayment.
Knowing that the factor would be hesitant to fund the needed payoff by providing an over advance to its client, MCASS went out to the mezz lending market to seek financing to achieve the needed MCA payoff. MCA Stacking Solutions first negotiated lump sum pay offs with the MCAs, following which it introduced the company to a mezz lender who was willing to not only finance the payoff but subordinate its debt to that of the factor; and also agreed going forward, if the company obtained purchase order (“PO”) financing from a 3rd party, to further subordinate its mezz debt to both the factor and the PO finance company.
Resolution: Sixty days following engagement by the company, MCASS negotiated a settlement with the 2 MCAs for payments of 50% of the outstanding debt, as well as arranged the financing of the payoff with the mezz lender at an annual interest rate of 29.5%.
Background: On referral from a factor, MCASS was engaged by a commercial printing company who originally had $6.8 million dollars of MCA debt, with a balance due at time of engagement of $5.0 million. The client was in default of the contracts as it was unable to maintain weekly payments of $148K to the MCAs. The factor had been supporting its client by providing over-advances that allowed the business to pay its MCA debt earlier in the relationship, but had cut off any further advances to the client to do so. The client was on the verge of having to file bankruptcy.
Strategy: MCASS initially approached the MCAs and arranged agreement with all to accept lower weekly payments that totaled less than 50% of the contract rates. Unfortunately, because of the client’s difficult cash flow situation and the factor’s refusal to support the temporary reduced payment structure, in less than a month’s time the client defaulted on the reduced payment plan. MCASS had to pivot to implement an alternative solution in this most difficult case.
With the cooperation of the client, the client decided to sell its business to an industry related competitor, which facilitated a payoff of the factor, its trade creditors, and most importantly, its MCA debt, resulting in the client, who had given a personal guaranty on its factor and MCA debt, being released from that obligation.
Resolution: MCASS negotiated with the MCAs to accept a total payoff of $1.8 million of the $5.0 million debt, which payoff was funded by providing a small cash advance funded by the Factor and an assignment of a portion of the client’s outstanding accounts receivable held by the Factor. The MCAs were left with the responsibility to collect the assigned A/R. The Factor was paid as were the trade creditors, and the business was sold, and the client released from its debt obligations.