Company Overview
The Company is an importer of outdoor apparel. The Company sells its products through two channels – a direct channel, consisting of its legacy catalog business, and its own website and online marketplace channel.
The Company sold through e-commerce retailers, including Amazon, EBAY, Walmart and others. The business is highly seasonal, with more than 70% of its annual sales occurring during the fourth quarter of the calendar year.
Engagement Overview
The Company retained Fort Dearborn to assess its liquidity position and advise ownership on its path forward. The Company had:
–A long cash conversion cycle (200-day procurement lead times and majority of annual sales concentrated in one quarter);
–Burned through substantial cash in the prior year due to operational, managerial, and environmental challenges; and
–Inadequate collateral to support its line of credit borrowing needed to support inventory purchase.
FDP reviewed the operation, including:
–Analyzing the operating plan for the coming fiscal year and assessing the viability of implementing a successful turnaround plan, given the operating model of the business and the limited access to capital;
–Analyzing the cash position of the Company and determining the cash need to fund the business through the coming fiscal year;
–Evaluating the viability of financing alternatives regarding related risk factors;
–Assessing strategic alternatives, including capital infusion, turnaround plan implementation, sale of the Company, and liquidation.
The Company’s severe liquidity situation was compounded by the impending need to procure long-lead inventory for the Company’s main sales season.
Results
FDP promptly developed and implemented a dual-tracked plan to: a) sell the Company as a going concern, and b) liquidate inventory through normal channels.
FDP directed the sale process, generating multiple offers.
The Company was sold as a going concern, closing on the sale within 5 weeks of filing the receivership.
The inventory liquidation process proved very successful, generating enough cash to pay off 100% of secured debt prior to consummation of the sale.
In addition to returning 100% to its secured creditors, FDP‘s fast and efficient process generated significant returns to the Company’s unsecured creditors.