Post season, the operator of 7 water parks in the entertainment industry found itself in sudden financial distress due to construction cost overruns at two new water parks.
The operator was unable to pay meaningful amounts of its debt service, which consisted of a revolver and a term loan and completely depleted its $5MM cash reserve to cover construction cost overruns.
Due to prospective valuations that were well below market, the lenders would not approve the sale of the parks.
The 1st lien lender moved toward foreclosure.
Advised the operator to supplement its cash flow using receipts from online membership sales.
Successfully negotiated an agreement between the lenders that allowed the 2nd lien lender to assume the 1st lien loan obligations in full.
The 2nd lien lender agreed to a consensual workout in which it took control of the assets and became the new owner.
Working collaboratively, loans were increased slightly as needed to enhance working capital.
The 1st lien lender was paid in full.
The 2nd lien lender took over the parks.
The parks were eventually sold at far less capital loss than projected had a foreclosure occurred.
The original owner/operator was able to walk-away with only a potential claw back on future earnings and it was relieved of its guarantees.
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