Company
Reorganisations [One Example]
Days Inns of America was, at the time
we were contacted by Cecil and Lon Day, the world's 7th largest hotel
chain, and the very fastest growing. At the height of a global economic
downturn Days Inns had 30% of their hotels under construction financing
(which is high interest and short term) and none of their bankers
and usual funding sources were prepared to give permanent financing
on these properties (mortgages,
hipoteks). Corporate liquidity was the fatal issue, the cash flow
would leave the company in default within a month of our initial meeting.
We convened a gathering for that week end to provisionally reorganise
the company. In attendance with us were all of the Days Inns Atlanta
directors and |
executive staff, plus the accounting firm and
Donley Smith, corporate counsel. Accounting procedures had not been
changed since the company's creation in 1970, so we took advantage
of the regulation which permits a company to change its procedures
once annually, and liberalised everything within the limits of the
regulation. This permitted us to recapitalise some assets, change
depretiation write-off schedule on others, capitalise good will, defer
certain liabilities out of the 'current' categry. Monday we called
in a number of the largest non bank unsecured creditors and persuaded
them to temporarily capitalize their debt by accepting title to some
of the unmortgagible properties. Tuesday we boarded
a plane for one of the financial capitals of Europe, taking with us
the company's new balance sheet, including a 'brown jacket' |
partners opinion from a big eight auditing
firm. In Europe wealthover provided collateral and pledges adequate
to secure a revolving credit facility equal to roughly a quarter
of Days Inns' monthly turnover. At the same time another team of
wealthoverrs were presenting Days Inn's directors with a choice:
"Either slash franchise prices for lots of the millstone hotels
to get them off of Days Inns balanse sheet and accept an internationally
recoginsed professional CEO or else let us do a settlement with
your creditors which will give you short term relief from creditors,
but greatly harm your reputation with banks and Wall Street".
Cecil Day accepted our recommendations and the rest is history.
Now Days is part of the Wyndham Hotel Group.
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