The Bottom Line:
After a business owner drew down his company’s $18 million line of credit and disappeared with the money and the company’s cash, the company’s secured lender sought the appointment of a receiver.
As receiver, Stapleton Group recovered over 80% of the lender’s principal through a carefully designed and executed process. The complex matter involved a vast amount of machinery and equipment (M&E) owned in joint ventures and located in warehouses controlled by others. Keys to the successful result included:
- Simplifying the liquidation process by creatively negotiating control of the inventory owned in joint ventures (JVs);
- Selling a wide array of more than 1,200 pieces of machinery and equipment through the normal course of business and by auction;
- Recovering, repairing then selling an antique Ferrari through Bonhams;
- Recovering and selling a yacht and three modern luxury vehicles, one of which was found in a salvage yard;
- Running a competitive process to sell 3 real estate assets: an industrial building in Cleveland, Ohio; and, commercial and industrial buildings in Los Angeles, California;
- Investigating financial records to identity other assets and potential sources of recovery; and
- Addressing the impact of family law rulings related to the absentee business owner’s divorce on the receivership estate and receivership assets; and
- Immediately took complete control of accounting and bookkeeping.
Obstacles and Stapleton’s Solutions:
- A large portion of the M&E inventory was owned in multiple JV partnerships with parties and assets domiciled throughout the country without sufficient documentation, creating significant risk to the successful recovery process.
- Contacted JV partners to independently confirm inventory in their warehouses and obtain records of ownership terms for the various JV partnerships.
- Carefully verified independent confirmations against the company’s internal systems to achieve 98% confidence in inventory reporting.
- Settled certain JV ownership splits by negotiating exchanges of JV inventory in JV controlled warehouses with JV inventory in the company-controlled warehouse.
- Gaining control of and liquidating substantial inventory and business assets for the highest prices.
- Stapleton ran a hybrid process to sell the auction business as a going concern while selling a substantial amount of disparate inventory for 150% of its appraised orderly liquidation value.
- Obtained an appraisal and engaged an auctioneer to set expectations on orderly and forced liquidation values.
- Attracted inventory buyers through direct marketing and closed sales by discounting older inventory and through aggressive negotiations.
- Collaborated with an auctioneer to host a 3-day online auction to sell remaining inventory located in California and Ohio.
- Selling the equipment vendor business while simultaneously selling three real estate properties in Ohio and California and liquidating inventory
- Stapleton identified, engaged and managed real estate brokers to sell the company’s warehouses and offices in competitive processes.
- Overcame title issues to successfully sell a warehouse in Ohio by working with an Ohio title company, meeting its closing requirements by presenting a sale approval order from the California state court.
- Prominent exposure and active marketing efforts resulted in competitive bids from 29 parties for one of the properties and generated significant interest in all properties.
- Identified vague references in the accounting records and related documents to investments. Found additional assets owned by related parties collateralizing the secured lender’s loan that were not part of the receivership estate, and therefore excluded from the original appointment order.
- Conducted a forensic analysis to decipher the investment references to trace transfers for the secured lender resulting in the recovery of a $750,000 yacht and other assets.
- Petitioned the court to expand the scope to add Receivership Defendants, resulting in the addition of commercial real estate valued at $3 million, an antique Ferrari, three luxury vehicles, the yacht, cash bank accounts and more.
- As part of their divorce proceedings, the business owner’s wife claimed an interest in various assets in the receivership estate.
- Provided reporting and communicated with the family law court, in addition to the receivership court, materially reducing the amount of her claim.