Generation Brands president: Prepackaged bankruptcy is 'really good news'
Generation Brands president: Prepackaged bankruptcy is 'really good news'
By Jenny Heinzen York -- Home Accents Today, 1/1/2010 12:00:00 AM
Generation Brands, parent company to Murray Feiss and Seagull Lighting, among other lighting fixtures and ceiling fan vendors, has filed voluntary petitions to implement an agreed restructuring of its balance sheet under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed Friday, Dec. 4.
The company has already received the required acceptances of its pre-packaged plan of reorganization from its lenders and noteholders, who voted strongly in favor of the plan. Creditors, other than the company's lenders and noteholders, will not be impaired by the plan. The company expects to successfully complete the restructuring of its balance sheet and emerge from Chapter 11 by the end of January.
This consensual restructuring will sharply reduce debt and interest payments, better positioning the company for the current economic climate, and to capitalize on opportunities both in the current market and emanating from the recovery of the housing industry and the economy at large.
President and Chief Executive Officer T. Tracy Bilbrough told Home Accents Today "this really is really good news. This is a permanent fix to our capital structure."
He said Generation Brands' customers would see no changes to the vendors they do business with. "For our customers, it gets the cloud out from over our heads," he said. "But it was more perceptual — we really haven't been held back with capital structure stress. It allows us to do more with so much less interest to pay. It gives us enormous comfort space if there is any further economic downturn, which we do not anticipate. ... If the economy rebounds, this will give us free cash flow for investing in product development and potentially acquisitions."
He said there would be no reductions in force as a result of the filing.
"We are obviously very pleased that after reviewing our business and our business plan, our lenders and noteholders approved our restructuring plan. This vote of confidence means a great deal to both the management and employees of our company and we believe it should be viewed by all of our constituents as the positive resolution that it is for our company," Bilbrough said in a press release about the announcement. "With our lenders and noteholders standing firmly behind us, we expect our stay in Chapter 11 to be short and relatively painless."
Bilbrough continued, "Our operating businesses have continued to perform well during one of the worst housing downturns in memory. Our capital structure has been the issue, not our operations. We believe that the increased financial flexibility and liquidity that this restructuring provides will enable us to become an even stronger company. Today's action is not only the quickest and most effective way to restructure our debt, it also provides us with the opportunity to better serve our customers and grow our company. We intend to continue all planned investments in new product development and customer programs. It will be business as usual during our brief restructuring."
Under the terms of the proposed restructuring plan, the company will eliminate more than $150 million in debt, resulting in greater free cash flow due to lowered interest payments. The terms of the proposed pre-packaged plan of reorganization also call for all suppliers and service providers to be paid in full and all employee obligations to be honored. Additionally, the company said that in connection with the proposed restructuring, Generation Brands will receive a new $20-million equity investment from its principal shareholder, Quad-C Management, Inc., upon emergence from Chapter 11. When Generation Brands emerges from the Chapter 11 restructuring, it expects to have more than $30 million in liquidity and no debt maturities until 2014.
In conjunction with the filing, the company has also received commitments for a $20-million debtor-in-possession revolving credit facility from its current revolving lenders, led by BNP Paribas as agent. When approved by the bankruptcy court, this financing will be available to fund post-petition operating expenses and to ensure that the Company can continue to meet its obligations to employees, customers, and suppliers during the Chapter 11 process.
"We appreciate the continuing support of Quad-C and the confidence in our business demonstrated by all of our key constituents," Bilbrough said. "With our stronger capital structure, enhanced balance sheet and significant liquidity, we can assure our customers of our continued commitment to deliver innovative design and quality products and services for many years to come."
In an effort to make its brief Chapter 11 restructuring as seamless as possible for its employees, sales agents, customers and suppliers, the company filed 11 "first-day motions." Together, these motions are designed to ensure uninterrupted operation of Generation Brands' businesses, including permission to pay suppliers in the ordinary course of business, continuation of existing customer programs and warranties, and commission and royalty payments to sales agents and designers.
For further information, please contact the company's information line at 866-360-3479 or visit generationrestructures.com.
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