Wind Down of a Distributor with Two Foreign Operations

DistributionFiduciary ServicesLitigation SupportTurnarounds & Restructuring

40M

Annual Sales

75M

in Debt

EB Brands, Elmsford New York

Challenge

Distributor of giftware, exercise products and industrial gloves to mass merchants. $40 million revenue. $75 million debt.

  • Company had a significant accounting overstatement of sales and earnings, which caused the secured lenders to take over ownership of company
  • Secured lenders as owners invested $25 million of new capital to clean-up aged vendor payables and provide cash to implement a turnaround plan
  • Company’s business model was questionable as it served 3 unrelated market segments and was burdened with a costly central distribution warehouse that was 3 times larger than needed. Additionally, company’s IT and financial infrastructure were very weak
  • The Company was losing over $500,000 monthly
  • Efforts to sell the Company failed to produce a buyer

Solution

  • Company management and owners agreed the Company needed to be consensually liquidated
  • Parties agreed to use a New York State Court Receivership for the liquidation

Results

  • MorrisAnderson (MA) assumed the Receivership duties
  • MA collected Receivables at over 95%
  • MA sold all the inventory, and sold Intellectual Property rights to certain brand names for $3 million
  • MA also wound down Company operations in the U.K. generating $1 million of recovery
  • MA liquidated the Company’s China operations
  • The secured lender received approximately 50% of its $25 million in new capital in recoveries, which was almost double their original expectations

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