Manufacturer of pillows and mattresses
We were engaged as Assignee for the Benefit of Creditors to manage and sell the assets of this company on a going concern basis. The company had been losing money for several years and the owner had identified a stalking horse bidder who was interested in acquiring the company. We analyzed the company’s operations and financial performance and determined that significant changes needed to be made in order to operate the company on a cash flow neutral basis until a sale could be effected. In order to stem the cash outflow, we reduced overhead significantly, right-sized staff, and trimmed the product line.
We continued to operate the company while negotiating an asset purchase agreement (“APA”) with the original stalking horse bidder. No additional influx of cash was needed during this period. When the original bidder dropped out for lack of financing, we identified additional interested parties and negotiated two additional APAs which ultimately were not signed for different reasons. As a result, we then organized an auction of the assets on short notice and recovered nearly fifty percent more than the negotiated purchase price in the last APA.
Importer of office chairs and children’s furniture
We were contacted by company counsel to review the firm’s options, including a potential liquidation of the company through an Assignment for the Benefit of Creditors (ABC). The company had been suffering moderate losses each year since inception and its lender was no longer interested in providing additional funds. Shortly after accepting the engagement, the company’s controller resigned to accept another position and the president absented himself from day-to-day operations. We assumed interim management of the company and were able to successfully reduce inventory by filling back orders and soliciting new orders. When the inventory was significantly reduced, we then sold the balance to a bulk inventory purchaser.
We sold the warehouse equipment and office furniture in local private sales. The remaining assets – the company’s intangible property consisting of trademarks and trade names – were sold in a public sale for a base purchase price plus a percentage of sales over the next 5 years.
Publisher of specialty magazine
We were engaged as Assignee for the Benefit of Creditors to liquidate the assets of the publisher of a collector’s quality specialty magazine targeted to a limited audience of enthusiasts. In addition to the magazine, the company maintained a web site and operated a film festival, both of which generated ad and subscriber revenue. We developed a list of potential purchasers of the intangible assets, solicited their interest in the company, and received a stalking horse bidder. We then conducted a telephone auction with multiple bidders after posting a notice on the Internet. This resulted in a final sales price that exceeded the stalking horse bid by more than 300%. To complete the engagement, we held a separate internet auction of the company’s computer and graphic design assets.
Sewer and Water Contractor
After incurring significant cost overruns on a major project, a well-established sewer and water contractor found itself in severe financial distress. The contractor’s attorney contacted us to determine the company’s available options. We analyzed the company’s cash position, construction in process, and outstanding obligations. Based on the analysis, we determined that the company’s best alternative was to liquidate and that the most cost-effective way to liquidate was through an assignment for the benefit of creditors.
As Assignee, we reviewed all of the company’s open projects and outstanding billings. We contacted the clients and arranged for payments for work completed and negotiated punch list items and other outstanding issues. Concurrently, we contacted several auctioneers who had significant experience liquidating similar assets. After completing our due diligence, we selected an auctioneer and held a successful auction on site. To reduce the auction costs, we were able to include surplus assets of another contractor located in the same geographical area. To enable the on site auction, we successfully negotiated with the landlord use and occupancy until the assets could be removed.
Electronic Mailing List Distributor
After burning through investor cash, running up significant open balances with its vendors and not paying its employees, this start-up email address aggregator was subject to losing control of its destiny. Some of its creditors had filed suit, and some threatened filing an involuntary Chapter 7 bankruptcy against the company. Many of the unpaid employees withheld company property, such as laptop computers, as leverage against the company. As assignee, we were able to maximize the return to the priority creditors. Among other things, we reaffirmed two (2) licensing agreements with other customers, which allowed for the collection of old accounts receivable and generated new accounts and cash for the estate.
We successfully negotiated the return of all company property (which was later sold on the open market) in exchange for satisfaction of deeply discounted employee claims. Most important, we were able to market and sell the company’s core asset – its database of 35 million email addresses with verified postal addresses – through an internet auction. After successfully defending against wage claims filed by unpaid employees and satisfying administrative claims, we were able to repay priority creditors approximately 60% of their claims.