Construction Restructuring & Lender Negotiation
Regional construction group — £25m turnover — three operating divisions
The Situation
A regional construction group with three operating divisions — commercial fit-out, social housing maintenance, and civil engineering — had tripped its banking covenants after a significant contract overrun on a public-sector project. The overrun, which ultimately cost £2.4m more than the original tender, had consumed the group's cash reserves and pushed the revolving credit facility to its limit.
The bank had placed the relationship under enhanced monitoring. The group's finance team, capable in normal trading conditions, did not have the restructuring experience to manage what had become a multi-layered problem: an immediate cash shortfall, a lender that needed convincing the business remained viable, and three divisions with very different risk profiles that needed disentangling.
The owner-directors had built the business over 18 years and were determined to find a route through. They needed external expertise to bring structure and credibility to a recovery that the bank would support.
Our Approach
Taiga was engaged to lead the financial restructuring and manage the lender relationship through a 12-month recovery programme.
The first priority was building a financial model the bank could trust. We constructed a 13-week short-term cash flow forecast alongside a 3-year integrated model — disaggregated by division — that gave the lender clear visibility over where the group's cash was generated, where it was consumed, and how the recovery would unfold under base, downside, and stress scenarios.
With the model in place, we led the negotiation with the bank directly. The core of the proposal was a revised facility structure: a short-term standstill on covenant testing, a modest increase to the overdraft limit secured against certified receivables, and a set of quarterly performance milestones that would trigger the return to standard monitoring. The bank agreed.
In parallel, we worked with the management team to implement a working capital improvement programme across the three divisions:
- Receivables acceleration: Overhauling the application and certification process on the two largest live contracts, reducing the average payment cycle from 67 days to 41.
- Subcontractor terms: Renegotiating payment terms with the top 20 subcontractors to better align outflows with certified income.
- Contract risk controls: Implementing a monthly contract review process with early-warning triggers for margin erosion, applied consistently across all three divisions.
We provided structured monthly reporting to the bank throughout, ensuring no surprises and building the trust needed to sustain the revised facility.
The Outcome
The banking facility was preserved in full. The working capital programme delivered £1.8m in cash improvement over the 12-month engagement, primarily through the receivables and subcontractor workstreams. The group returned to covenant compliance within nine months and was moved off enhanced monitoring by the bank at the 12-month review.
Beyond the immediate financial recovery, the engagement left the business with a fundamentally stronger operating rhythm. The divisional cash flow models and contract risk framework we built became embedded in the group's monthly management cycle — giving the directors the early visibility they had lacked when the original overrun spiralled. The business continued to trade and grow, securing two significant new framework contracts within six months of the recovery completing.