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Orchard Brands

Background

Orchard Brands (also known as Appleseed Intermediate Holding Company) was an approximately $1 billion multi-channel retailer of apparel and accessories aimed at the baby boomer market. Charlie acted as the Financial Advisor to the Official Committee of Unsecured Creditors.​


SOURCES OF DISTRESS

  • Assembled through a series of debt-fueled acquisitions over multiple years, the company ultimately owned over 13 brands including Draper’s & Damon’s, Haband, Norm Thompson and others, which it sold primarily through print and online catalogs, as well as through various branded stores throughout the United States.  

  • Over the course of 5-7 years, Orchard Brands acquired six companies, but was unable to achieve virtually any of the projected synergies of their rollup plan. All the brands continued to operate independently and suffered a slow but persistent decline in sales despite growth in their target demographic. ​

  • As part of an interim closure, the private equity sponsor also took a several hundred-million-dollar dividend recapitalization immediately following the closing of the acquisitions.  ​

  • Eventually, the company was forced to file a pre-arranged plan of reorganization after it breached covenants numerous times and was unable to make current principal and interest payments as former PIK (payment-in-kind) debt went to a current-pay basis.  



Reorganization & Results

Listed below are a few of the areas where Charlie assisted Orchard Brands in achieving important results:

Avoidance Actions​

In exchange for the committee’s support of the plan, the advisors (including counsel at Cooley) were able to retain company causes of actions (including avoidance actions) as well as a small litigation seed fund to pursue them.​

Financial Statement Analysis​

Under the original plan that had been negotiated with the various tranches of senior lenders, the trade creditors would have gotten little more than a few cents on the dollar, primarily in connection with their reclamation claims.​

Relying on his own retail operating experience and that of his partners, Charlie and his team laboriously worked to deconsolidate the company’s financial statements over many years to be able to analyze the effects of multiple acquisitions, both from operating cash flow and financing perspectives.

Solvency Assessment​

Based on those analyses, Charlie and his team were able to demonstrate that the more than 4-year-old dividend recap transaction actually left the company insolvent at the time it was executed.

Returns to Unsecured Credits​

This, in turn, helped the counsel obtain a very favorable settlement on it pending fraudulent conveyance litigation from the former sponsor that ultimately resulted in returns to the unsecured creditors in excess of 45% of their allowed claims.​




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