CASE STUDIES

Transforming a Distressed Manufacturer into a Profitable Exit

Overview

Aspen Air U.S., LLC (‘Aspen Air’), is a leading industrial and medical gas producer in the U.S. Mountain West region. Following a bankruptcy declaration in 2018, Invico Capital Corporation reorganized and institutionalized the company. After four years, it was sold at a premium of nearly 16% over its value, with a total value to paid-in capital (TVPI) of 3.2 times.

The Challenge

Due to a combination of uncollectible receivables, heavily secured debt, and high operating costs at Aspen Air’s facilities, it filed for bankruptcy in 2018. As part of the Bankruptcy and Insolvency Act process, Invico Capital Corporation acquired the business assets to take over strategic control and implement significant changes to restore the business as a market leader.

Invico's Approach to Equity Yield

Invico Diversified Income Fund’s (“IDIF” or “the Fund”) equity yield portfolio serves as a transitional sleeve, comprising distressed assets acquired through the debt stack or taken over due to loan defaults, as well as any warrants and equity positions negotiated within loan agreements. IDIF’s investment mandate concerning equity yield assets is to optimize the company and make it profitable so that the Fund can best position it for sale and the next stages of business growth.

The Solution for Aspen Air

After the Fund took control of the company assets, Invico immediately began the process of developing a strategic plan focused on core business profitability. This included investing in operations through assets and improving corporate governance and communication. This solution broadly involved developing six strategic pillars within the business:

Leadership team and culture development

People development and business acumen training

Business planning and accountability framework implementation

Critical business process and business infrastructure institutionalized

Organic growth machine and sales function development

Operational and safety excellence framework implementation

The implementation of new frameworks and investment within the business began immediately in 2018, following the management transition to Invico. The following year, under this new leadership, Aspen Air undertook fundamental shifts in strategy, which led to the successful transformation of the business over the course of four years. This included:

Investment into mobile storage to enable the ability for large-project mobile storage for gases, as well as expanding the plant's own storage capabilities.

A large-scale marketing and sales effort to target midstream and petrochemical customers in Aspen Air’s trade area.

A shift in the management compensation structure, incentivizing managers based on key operating metrics to ensure retention of key employees.

The completion of repairs and replacements of key infrastructure at Aspen Air’s two manufacturing plants. In addition to the installation of compressors and generators to enhance efficiency and production.

The Outcome

Due to IDIF’s equity yield mandate and the expertise of its Investment Team, the Fund successfully restructured Aspen Air while continuing to build value for unitholders throughout the process. In summary, following a rapid four-year transformation of the business, Invico Capital Corporation sold Aspen Air to the Iwatani Corporation of America in December 2022 for a final purchase value that was a 15.7% premium over the business’s Q3 2022 valuation with a TVPI of 3.2 times.