Apparel Brands Distributor

The Client

The Company was the largest trade, private label, and exclusive Apparel Brands Distributor to the imprinting, embroidery and promotional product industries. The Company operates eight distribution centers across the U.S.

The Challenge

With support of its equity sponsor, the Company embarked on a roll-up strategy that entailed the acquisition of a number of companies in its industry that was financed, in part, by a $225 million public bond offering. While the roll-up strategy was successful, it left the Company with legacy costs that negatively impacted its current financial performance. The Company’s financial difficulties were exasperated by the economic downturn that caused further decline in its revenue and earnings. This all culminated in a liquidity crisis as a $25 million interest payment was approaching that the Company could not make that would cause it to default on the public bonds as well as its bank loan in the amount of $225 million.

The Solution

Phoenix, teaming with management and the Company’s other advisors, affected a successful transaction in which the $225 million dollars of public bonds were exchanged for $94.5 million in bonds with improved terms, including extended maturity dates, plus issuance of common stock providing the bondholders with a 94% equity interest in the Company. This transaction required intense negotiations with the bondholders as well as the Company’s bank group and equity sponsor. Phoenix’s role in this effort involved developing financial information, including cash flow forecasts, in support of negotiations and analyzing a number of alternative solutions to the Company’s liquidity crisis including the possibility of filing for bankruptcy protection.

Phoenix also assisted the Company in managing its cash position during this difficult period by assuming the responsibility for vendor relations that had become strained as the Company’s ability to maintain terms deteriorated and by developing and implementing effective cash management techniques to reduce the increased aging of receivables that had occurred as the Company’s customers base, comprised primarily of small to mid-sized companies, suffered through the recession.