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Throughout the past 10 years, the homebuilding industry has sustained one of the greatest business expansions in the history of American industry. The Community Reinvestment Act, expansion of Freddie Mac and Fannie Mae, and the plethora of creative derivatives increased opportunities for home ownership as in no other time in history. Now, as we reap some of the consequences of excessively aggressive lending, what are homebuilders and home manufacturing companies to do as their sources of capital dry up, unsold inventories grow, and prospective home buyers remain wary as home purchase capital is more difficult to obtain? Based on our recent experience in this sector, we have found that some homebuilders continued to operate “as usual” even as demand and capital declined. As a result, the newspapers report almost daily the sad story of another builder bankruptcy or liquidation. Yet, we have found others who have continued to operate and have built a process for longer term survival by being nimble, remaining wary of shifting paradigms, and adjusting their operations quickly, such as by dramatically shifting from spec to contract building as market conditions began to erode. They may suffer from market or margin erosion until the market conditions change, but they have at least protected themselves for the long term. “The first thing to do is to realistically assess your company’s position in your market, manage your cash flow and liquidity, be realistic in terms of your availability of capital, and adjust your overhead as quickly as possible” advises Daniel Wikel, Huron Managing Director based in Chicago. “Figure out where you are so that your company can continue to meet its market needs and maintain the critical relationships with your suppliers.” Sanford R. Edlein, Managing Director based in Dallas, adds, “The smart thing to do is to understand the changing environment and quickly adjust operating costs so that at some minimal level you can at least cover debt service and the reduced cost of operations.” Huron recently worked with a Southwest-based homebuilder to cut costs, renegotiate loans, and revise and downsize commitments from developers in order to stabilize, achieve break even, and fix the capital structure. “There are no easy fixes,” says Edlein. “It may be necessary to drop projects or product lines, and sometimes walk away. The keys to success and surviving hard times are realism, honesty, and the ability to change and make very difficult choices, or you may be doomed to failure.” We have found that communication during this process is critical. “Once you have your stabilization plan,” advises Wikel, “share it with your customers and suppliers and, most important of all, your lenders. They don’t like surprises.” By taking a hard look at your market and financial situation and doing what is necessary to stabilize your operations, you increase your chances of riding through the rough patch. “There is always a cycle,” says Edlein, “If you survive, when things improve, you’ll be ready to take advantage of the situation and your competitors will be long gone.” |
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Huron Successfully Assists Manufacturer to Avoid Bankruptcy Huron Helps Lender Recover Funds Huron Assists Financing and Successful Assert Sale To read the full case write ups, please click here to download and read a PDF. |
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News – In the Press Tailoring a Turnaround Pitch to Hedge Funds Capitalizing on New Realities in a New Economy by David Johnson, The Journal of Corporate Renewal Ratio Analysis: Highlighting the Story within the Numbers as published in The Journal of Corporate Renewal John DiDonato was recognized as a Top Crisis Manager by The Deal. Huron was recognized as a Top Crisis Management Firm by The Deal. |
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John DiDonato - Managing Director Throughout his career, John has served in excess of 100 debtors, functioning for many as chief restructuring strategist. He also has extensive experience servicing debtors and creditors with syndicated senior credit facilities and complex capital structures. Throughout his crisis management career, John has raised replacement and exit financing in excess of $1.5 billion. He is a Certified Turnaround Professional, Certified Managerial Accountant, and formerly a Certified Public Accountant. |
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Huron Consulting Group helps clients effectively address complex challenges that arise in financial distress, litigation, disputes, investigations, regulatory compliance, procurement, financial distress, and other sources of significant conflict or change. The Company also helps clients deliver superior customer and capital market performance through integrated strategic, operational, and organizational change. Huron provides services to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations, and the law firms that represent these various organizations. Huron’s restructuring and turnaround professionals assist financially distressed companies, creditor constituencies, and other stakeholders in connection with out-of-court restructurings and bankruptcy proceedings. We work closely with management to create, analyze, and implement strategies that secure the future of the distressed company and identify underlying operational issues, not just financial problems, to maximize the organization’s value to shareholders, creditors, and employees. Our professionals bring operational, financial, functional, industry, and cross-border expertise. Learn more about Huron’s Restructuring & Turnaround team. |
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Richard Caruso Michael Cavan John DiDonato
Dalton Edgecomb Sanford Edlein Sherman Edmiston Thomas Evans
Alain Le Berre |
Brian Linscott James Lukenda Shaun Martin Jerry Sepich Michael Sullivan Rob Vanderbeek, Jr. Dan Wikel |
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