Retail & Consumer
MERU CASE STUDY
Business plan and liquidity review for $300M TL lender group of a sponsor-backed $200M retail entertainment chain
- Our client, the lenders for a $300M TL facility, engaged MERU to assess borrower’s liquidity needs, recovery plan, historical performance trends, and industry / market trends review.
- Pre-COVID-19: The Company was profitable and growing, but de novo and acquisition growth masked declining same store trends resulting from 1) concept maturity, 2) increasing competition within its markets and 3) lack of reinvestment in existing locations.
- COVID-19: As a result of park closures and decreased operating performance in the wake of COVID, financial sponsor contributed additional capital & amended the credit agreement
- MERU was engaged by the lender group to provide an independent perspective on the Company’s:
- 1) Forecast and cash flow forecast models;
- 2) Operational risk;
- 3) Completed & anticipated cost reduction measures;
- 4) Industry / market research with target customer base on an anonymous basis to assess the market sentiment
- MERU employed several tactics to assess the Company’s plan, including:
- In-person visits to many of the Company’s parks
- Hiring a research firm to construct a database of all competitors across the world
- Management and expert interviews
- Analyzing 7 years of operational data
- 500-person customer survey of park customers
Presented revised financial forecast scenarios and risk assessments to lenders based on sensitizing key forecast drivers.
Drafted near and longer-term market segment outlook across five key factors: COVID-19’s impact on consumer sentiment, macro-economy related, competitive intensity, category novelty, category safety concerns.
Quantified liquidity need and timing and identified working capital opportunities to address likely year-end and 2021 shortfalls.