| CITR SUCCESS STORIES | Oncos Group Case Study

Type:
Opinions & Studies

Date:
2020-09-25

Case study.

Founded in 1991 and with over 800 employees today, the Oncos Group is recognized as the 43rd largest and most dynamic employer in Romania, the 10th in the top of Romanian poultry meat producers, and currently in the top 100 companies with Romanian capital.

Oncos is a group of private capital companies, with a main focus on the production and distribution of fresh chicken meat, bread, pastry products and eggs. The trade activity is carried out through a network of retail stores located in 15 different cities and its own warehouse.

The company has 8 active farms and 1 dormant farm, 44 commercial units (stores) and 436 employees.

 

citr oncos romania

Causes of distress

Oncos made a series of low-performing investments that required a substantial financial effort, without having a real prospect of recovery. The bank loans attained for this purpose represented approximately 54% of the total debts registered in the debtor's balance sheet, indicating the high dependence on external financing sources.

 

The Restructuring plan

Oncos’ restructuring plan consisted of a 3600 strategy, relying on the customization and implementation of an appropriate management solution. The plan also took into account marketing, organizational and structural new policies.

Some of the key actions implemented within the plan:

  • Cost reduction through: i) renegotiation of contracts with energy suppliers; ii) streamlining of transport costs by using various monitoring devices; iii) renegotiation of contracts with raw material suppliers;
  • Revenues were increased by taking specific actions like: i) rebranding the commercial units; ii) territorial expansion and access to new markets; iii) diversifying the range of products and services; iv) investments in various assets of the company;
  • A 6 months moratorium from all 6 banking creditors was granted, which allowed the company to make some investments with the purpose of modernizing the machineries used in the production process;
  • All loan agreements were restructured so as to allow Oncos i) to repay only 24% of the capital amount within 3 years of a monitored restructuring process and the rest in a bullet payment at the end of this period (to be covered either by a new financing or to be transferred to a new company that should be considered bankable) and ii) to have access to a reduced interest of only 2%/year compared to 11%/year as it was provided in some of the loan agreements;
  • One of the business lines was transferred (assets & debts) to another company of the Group, that was suitable for receiving new financing.

 

Advantages of the Restructuring

Before and After

citr oncos romania

*€16,100,000 paid, €8,610,000 transferred to another company, €6,190,000 written off

The success story of Oncos has saved more than 700 jobs (group-wise), with an impact on more than 2,100 people.

 

Conclusions

When comparing the 2 available scenarios (i.e., restructuring and liquidation), the following key notes should be taken into account: the restructuring plan provided that secured creditors were to be covered in full, by comparison to only 46% which would have been a maximum coverage in case of stopping the company’s activity, placing it into liquidation and selling all its assets.

Employees and tax creditors would have been covered in full in both scenarios, however, the employees got to keep their jobs in the restructuring scenario and tax creditors have gained a healthy contributor.

If we were to reveal the secret of this success story, we must say that this was a team effort supported by a mix between the right approach and a high level of professionalism.

Everything started with a change of mindset, continued with changes in the operations and strategies, and ended with new policies being implemented and more efficient ways of doing business.

 

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