Advisory and Cash Flow Services
Cash Flow Modeling:
ARG Partners historically demonstrates that cash flow quality starts with asset quality. ARG Partners’ cash flow models include full financial statement forecast with a centric approach toward working capital assets and borrowing base availability. Additionally, if collateral includes long-term fleet or real estate assets, then ARG Partners schedules out such assets, and the performance of long-term assets is integrated into working capital liquidity calculations. ARG completes a comprehensive cash flow model in order to effectively advise its clients.
If a company has the wrong assets or too many assets relative to cash flow from operations, then ARG Partners can formulate a plan to reduce certain assets and/or add more productive assets without jeopardizing liquidity. When a borrower’s asset quality is maximized so too is its cash flow from operations.
ARG Partners is engaged at all different points during a borrower’s liquidity cycle. Early identification of troublesome assets, a borrower that is over advanced on its line of credit or when a borrower’s cash flows are underperforming its industry, ARG Partners is engaged to identify and execute a restructuring plan to solve continuing liquidity issues.
ARG Partners normally provides cash flow modeling services under a fixed costs agreement with borrowers without any future obligations to the borrower to retain ARG. Fixed costs ensure borrowers are not burdened with the fear of high costs that are associated with consultants. A borrower’s actual restructuring plan is identified within an ARG comprehensive cash flow model, so in order to have ARG Partners execute a restructuring plan, borrowers decide whether or not to reengage ARG Partners. ARG Partners has been reengaged by borrowers 100% of the time after development of an ARG Partners comprehensive cash flow model.
ARG believes that in order for restructuring plans to be effective, owners and management of borrowers must adopt their plan as described in the ARG comprehensive cash flow model, and with the decision to reengage ARG by owners/management to execute the plan, owner/management’s support of the plan is confirmed.
Every ARG Partners comprehensive cash flow model includes:
- Forecasted balance sheet with calculated cash balance
- Projected P&L with margins, cash flows from operations and EBITDA calculations.
- Working capital roll-forward calculations for accounts receivable, inventory, accounts payables and line of credit projections.
- Projected borrowing base availability with supporting calculation and ineligible tracking.
- Special analysis of payroll, fixed assets, debt schedules and other items depending on borrower and 3rd party users of the cash flow model
(models are customized for user(s) equity holders or lenders or both).
- Cash flow model summary page with assumptions, time sensitive Sources and Uses and borrowing base calculation, plus other key elements related to the
borrowers restructuring plan.
- ARG Partners enjoys having asset appraisals and most recent field examinations made available for cash flow modeling. Previously completed reports with borrower’s financial information is 80% of what ARG needs to complete a comprehensive cash flow model.
ARG Partners cash flow models are collateral centric and with ARG Companies, collateral performance is what we know best. Knowing how assets are going to perform in the future is ARG Partners’ differentiating factor from competing advisors. ARG’s knowledge of collateral performance helps ARG Partners pinpoint liquidity, cash flow outcomes and advise clients accordingly.
13-Week Cash Flow Modeling:
ARG Partners is also engaged to implement a simpler 13-Week cash flow model when liquidity needs require daily or weekly measurement by lenders, stakeholders and bankruptcy proceedings. Mostly ARG Partners is engaged as a CRO or CFO when 13-Week cash flow modeling becomes necessary so that there are controls in place for cash planning. If ARG Partners already developed its comprehensive cash flow model, then converting to a 13-Week cash flow model is simple. 13-Week cash flow models include:
- 13-Week Cash In Flows and Out Flows to roll-cash/liquidity weekly.
- Matching 13-Week working capital roll-forward of accounts receivables, inventory, trade payables and lenders revolving line.
- Matching 13-Week borrowing base calculation.
- Weekly budget to actual comparison and budget to date comparison to actual to date.
ARG Partners 13-Week Cash Flow’s purposes are to:
- Inform lenders that approved budgets are being adhered to and there is no unapproved diminution of collateral.
- Borrower along with ARG CRO is following the lender approved budget to fund.
- ARG Partners will often also maintain a Comprehensive Cash Flow Model in order to manage other solutions such as an asset sale or equity infusion.
- If restructuring through bankruptcy becomes the only option, both the 13-Week and Comprehensive Cash Flow Models remain important to maintain
liquidity and to continue to find a long-term viable solution for the borrower.
Once completed, ARG’s client-based cash flow model is used to demonstrate the cost/benefit of any scenario. Whether ARG is retained as a CRO, CFO or with a specific scope for debt/equity services or bankruptcy services, ARG’s comprehensive cash model specifies the plan to accomplish desired outcomes.
As an advising CRO or CFO, ARG Partners is rationalizing and managing liquidity daily. Additionally, ARG is executing a plan to restructure the company to a period when borrower’s liquidity normalizes through sustainable cash flow from operations.
CRO or CFO advisory solutions may be refinancing or recapitalizing plans in combination with “right-sizing” operations, system upgrades, C-Suite changes, discontinuing underperforming divisions or product lines and sale of assets or the company. And if necessary, ARG Partners can develop and execute plans in or out of bankruptcy, receivership or an ABC – at all times projecting liquidity with the support of lenders and stakeholders and if necessary, winding down a company when all plans do not successfully produce positive results.
Often times ARG Partners is engaged after one of ARG’s other service verticals has produced services for a client. Much of what ARG Partners does in its unique cash flow models is based on an ARG appraisal or field examination results. The analysis completed by other ARG Companies is utilized by ARG Partners and saves time and money in the cash flow modeling process.
ABL Ready and Investment Grade Ready Services:
ARG Partners are proactively engaged by borrowers to help them get their books and records in order to be ABL ready and investment grade ready.
ABL ready services are geared toward the ability of a company to report borrowing base needs regularly and on time. Too often performing companies’ reporting capabilities lack enough detail or the reports are not developed in order to satisfy ABL reporting standards. ARG Partners are engaged to help develop and educate borrowers reporting capabilities when changes are significant in order to meet lenders/stakeholders’ reporting requirements. Less material issues for ABL reporting issues are addressed and corrected during an ARG Transaction Services’ field exam.
Investment grade services are advising clients on standard operating procedures and processes to expedite financial statement audits, modify operations to meet industry standards and implementation of operating metrics that quickly allow management to identify and correct profitability issues. ARG Partners investment grade services helps companies increase their sale multiple materially higher than if they hadn’t engaged ARG Partners. A half point higher multiple is worth $5MM for a company with $10MM in EBITDA, so the payoff is worth the investment into ARG Partners’ investment grade ready services.