A medium-sized production company in the non-ferrous metals industry experienced fluctuations in turnover due to a highly cyclical customer sector (steel industry), which led to negative company results in periods of weak demand. An ESUG procedure in accordance with Section 270b InsO (protective shield procedure) was agreed between the shareholder, principal bank, management, works council and trade union in order to restructure the company in a sustainable manner. In addition to the cost optimization measures, another focus was on the market and customer-oriented alignment of the company.
The company is a classic medium-sized enterprise (SME) in the metal industry with a production focus on mechanical processing (turning, milling, drilling) as well as on sophisticated welding work and welded constructions. It is characterized by a workforce with a high average age, very long periods of employment and a high degree of unionization.
Staff reduction of ten percent by founding a transfer company
As sole managing director, the current interim manager, together with a CRO experienced in insolvency and the trustee appointed by the court, was able to achieve a maximum socially acceptable staff reduction of ten percent of the workforce by founding a transfer company after intensive negotiations with the trade union and works council. The cost savings from the ESUG procedure compared to a staff reduction with severance payments defined under labor law amounted to around one million euros. In addition, the ESUG process made it possible to transfer the pension obligations for all employees who had already left and for those leaving during the proceedings to the pension guarantee association.
Improved financial situation through debt restructuring and insolvency money
In cooperation with the banks, the ESUG process made it possible for the company to terminate and "optimize" long-term debts on an extraordinary basis. For example, an unsecured KfW loan of one million euros was terminated and satisfied on a pro rata basis. The three-month insolvency payment from the Federal Employment Agency significantly improved liquidity and was therefore a key component in financing the ESUG proceedings.
Finally, the current interim manager was able to make a significant contribution to agreeing a "future collective agreement" (company collective agreement) with the trade union and works council. In this agreement, the employees undertook to work additional hours beyond the weekly collectively agreed working hours free of charge.
ESUG process successfully completed after six months
The ESUG process was completed after exactly six months and can be described as a complete success. Positive balance sheet effects were realized through the measures described (termination of the unsecured loan and transfer of pension obligations). They led to considerable relief on the liabilities side. At the profit and loss level, the socially responsible reduction in personnel in particular was the decisive instrument in significantly reducing the break-even point and making the company much more robust in the face of demand-related fluctuations in sales.
The sales team succeeded in not losing any (target) customers thanks to very close communication and maximum openness and transparency towards the market.
The company has generated stable positive results since the conclusion of the ESUG proceedings.
