Case Study: Sunshine Biscuits, Inc.

Sunshine Biscuits was a large manufacturer and distributor of branded baked goods.  The company was in covenant default under its senior notes held by a group of insurance companies.  As advisors to the company’s noteholders and its bank lender, our assignment was to evaluate the company’s financial restructuring proposal and related operational plans.

Although retained as advisors to the company’s creditors, we were able to provide significant operational and analytical assistance to company management in areas not previously developed adequately, including:

  • Installing cash management and control systems
  • Evaluating the opportunity to consolidate facilities
  • Understanding the series of complex, inter-related reasons for declining profitability

As a result of our in-depth analysis, it became evident that certain of the company’s core brands were steadily losing market share resulting in excess plant capacity and non-competitive overhead costs.  However, it also became clear that the company had a growing “crown jewel” product line that had more value as an individual branded product than the total company.  We recommended to our clients that significant changes be made to the company’s operational plans before the financial restructuring was approved.

The company elected to implement many of our suggestions.  Assets were sold and a new lender group refinanced the debt in full. Subsequently, the company was merged with a stronger industry competitor.