The Bottom Line:
As Assignee in the Assignment for the Benefit of Creditors (“ABC”) of a multi-channel, direct-to-consumer retailer, Stapleton Group improved creditors’ recovery from zero to $2.5MM+ by designing and implementing the competitive sale of business assets and substantially reducing vendor claims. Keys to the successful outcome included:
- Hiring and collaborating with an investment bank to aggressively market the Company’s intellectual property – history and name recognition, strong brands, substantial customer list – resulting in the sale of business assets to a competitor;
- Winding down operations in an orderly manner by continuing order fulfillment to generate positive cash flow;
- Reducing vendor claims by roughly $4.0MM by offering options to sell-thru, retrieve, or abandon inventory;
- Negotiating with the landlord to reduce costs related to exiting a 200,000 sq. ft. warehouse;
- Recommending that the Company file for an Employee Retention Credit (ERC) to potentially recover an additional $5.0MM for creditors; and
- Reviewing and administering the claims process for unsecured creditors.
The Business Issue:
The 50-year-old Company offered a broad selection of consumer products at affordable prices through six catalogs, seven E-commerce channels, and an onshore call center. Despite strong vendor relationships and significant customer loyalty, the Company’s revenues and profits had declined to the point of insolvency due to increased competition; rising costs of paper, shipping, and labor; supply chain challenges resulting from the COVID-19 pandemic; and, other economic factors.
Genesis of Stapleton’s Engagement:
A bankruptcy attorney invited Stapleton to collaborate in assessing options for the Company. The attorney and Stapleton demonstrated the advantages of an ABC, relative to bankruptcy or a receivership, to the Company’s leadership.
Obstacles and Stapleton’s Solutions:
- A significant amount of vendor inventory remained in the Company’s warehouse at the date of the ABC.
- Stapleton designed creative options and coordinated with hundreds of vendors to either sell-thru, pick up or abandon their inventory.
- Stapleton’s systematic process simultaneously reduced anticipated claims by roughly $4.0MM and emptied the Company’s warehouse as required by its lease.
- Transferring copious amounts of haphazardly stored critical data to the buyer.
- The full sale price was subject to the successful transfer of all data.
- Stapleton successfully preserved and transferred all historical, required data.
- Restoring the Company’s massive ~200,000 sq. ft. warehouse to its original condition per lease terms.
- The warehouse contained equipment, inventory, racking, conveyors, materials, waste, and other items accumulated over 50 years.
- Stapleton continued order fulfillment during the ABC to cover the costs of restoring the warehouse and building to its original state.
- Stapleton worked with various liquidators to sell FF&E and remnant inventory.
- Stapleton retained employees and contractors to manage the clean-up process, strategically reducing headcount as directives were met.