With decreased enrollments, a small private, not-for-profit college was struggling with cash flow and not sure if it would be able to meet all its obligations through the summer. The college retained Getzler Henrich (“GH”) to assess the cash needs of the college, assist in the preparation of its budget, and assist in the restructuring of the bond debt.
GH worked with management to implement a rolling weekly cash flow, along with weekly variance reports. By stretching payables, obtaining two short-term loans, and overall managing and monitoring the cash flow (which had not been previously done), the college was able to get through the summer months, satisfying all obligations.
During this time, GH worked closely with management in the preparation of the budget, which included a thorough review of each department and the faculty needs. Since revenues were down due to the reduced enrollment, there was a need to reduce the teaching faculty as well as review all the operating expenses. With management, GH identified areas for expense reduction in excess of $4 million; this is in the process of being implemented. In addition to the cost reductions, excess real estate has been identified to be sold to generate additional cash flow.
GH assisted in the negotiation of a forbearance agreement with the bondholders, which included a principal moratorium, to help the college with its cash flow.
In addition to the restructuring of the operations and debt, the college retained an outside firm to assist in the recruitment of new students. Together with the expense reductions, sale of the excess real estate and restructuring of the bond debt, the college was projected to operate with positive cash flow.
The final piece of the restructuring was the restructuring of the bond debt, which was to be obtained when the college had higher enrollments and the cash flow to support the debt service of the bonds.