The Workout Group LLC (TWG) may be one of the only groups of professionals that have led successful restructurings of microcap companies in the last 2 years. They were known as OTCWORKOUTS, LLC but changed their name to better reflect what they do.
Below are three case studies where TWG recapitalized the company and remediated its’ debt that resulted in increased shareholder equity and helped the companies to secure quality investment bankers.
It should be noted that the expectations for a cleaned up microcap company are different for those running the companies and those trading in their stock. TWG are not miracle workers. Some microcaps cannot be rehabilitated and that’s why they are selective with whom they work with. The process of restructuring is arduous and requires the issuer to make difficult short-term decisions in exchange for increasing opportunities for long-term growth and success. The case studies below are examples of that.
Case Study 1 (7 months to complete):
The company presented with approx. $11,000,000 in debt consisting of $5,000,000.00 in trade debt, $3,000,000.00 in toxic convertible debt and $3,000,000.00 in shareholder debt including personal guarantees. The company had 4,000,000,000 shares issued and outstanding and trading at .0001. The company’s executive management and board lost ownership control of the company through vicious convertible debt practices that effected overall shareholder value through dilution. There was substantial infighting between board members and the company was administratively paralyzed.
TWG developed an overall and comprehensive floor plan to effectively recapitalized the company from 4,000,000,000 shares to 20,000,000 shares issued and outstanding, remediated more than $9,000,000 of the overall debt ($1.8M toxic and $7.2M in trade) by taking that debt off the books and putting that debt into long term Preferred equity. This increased shareholder value by over 2000% and put corporate management back in control. The company is now in negotiations to complete an accretive merger/acquisition.
Case Study 2 (10 months to complete):
This company presented with $18,600,000 in debt consisting of $13,000,000 in shareholder loans and liabilities (non-insiders), $900,000 in toxic debt and $4,700,000 in trade debt (engineering, manufacturing and distribution). The company had 1,700,000,000 shares issued and outstanding that was trading at .0003. The executive management lost ownership control through various dilutive loans and financings.
TWG developed an overall and comprehensive plan to effectively recapitalize the company from 1,700,000,000 common shares outstanding to 30,000,000 common shares issued, remediated more than $16,400,000 in debt including more than $700,000 in toxic convertible debt, $12,600,000 in shareholder loans and liabilities (non-insiders) and $1,900,000 in trade debt by taking the debt off the books and moving the debt into longer term Preferred equity. This will have the effect of an increase in shareholder equity by approximately 1700% and put management back into ownership control. The company has now secured a quality Wall Street Investment Banking firm.
Case Study 3 (3 months to complete):
This company presented with $3,000,000 in debt consisting of $2,600,000 in trade debt (engineering) and $400,000 in convertible debt. The company did not want a complete restructuring but desired two things; 1) To raise capital on a less dilutive basis and 2) to make sure that management did not lose voting and ownership control of the company.
TWG created a plan for company to raise up to $1,000,000 by designing a few new series of Preferred Equity that effectively keeps management in voting and ownership control and successfully used the new series of preferred stock to raise more than $600,000 to date.
The above case studies summarize TWG’s efforts and due to confidentiality agreements and non-public information rules, we are not allowed to publicly identify those companies.
For clarity, TWG measures success in several different ways. Did they listen to management? Did they design a plan that can be approved and executed by management? Did they accomplish a substantial portion of the plan? Did the plan improve the company’s shareholder value?
Since TWG deals mostly with microcap companies, there are varied expectations depending on who you are. Shareholders want to see improvement in price per share. Management wants to know that they keep control while attracting clean quality capital. Investment Bankers want a true investment opportunity without the typical microcap stigmas created by prior bad financial decisions.
The plans that TWG design do all of the above, but it is up to the company’s themselves to execute on each plan. There is no one size fits all in a corporate restructuring as every company is unique from their products, the type of debt they carry, their capital structure and corporate culture. Every company poses new challenges and not all restructurings work out as designed.
TWG works with a handful of credible boutique Wall Street investment banking firms, traditional investor relations firms and several securities attorneys, PCAOB Audit firms and transfer agents.
If your company is experiencing challenges in raising capital or managing its debt, it could very well be because of how it raised capital in the past. The good thing is in most cases, TWG can help but you need to decide whether or not a partial or full restructuring is for you.
The Workout Group, LLC offers microcap companies a free consultation. Just visit their website at www.theworkoutgroupllc.com and click “register” to schedule your free consultation.