Despite F&F Food’s lack of capital and credit availability, Gordon Brothers Group saw value in the company’s brand portfolio, unique manufacturing profile and leveraged assets.
Gordon Brothers Group acquired the senior debt of F&F Foods and placed the company into Assignment for the Benefit of Creditors.
As the secured lender, Gordon Brothers Group provided sufficient capital to fund F&F’s regular operations while closely monitoring all major financial decisions and expenditures on a weekly basis.
F&F Foods, Inc. was a leading manufacturer of branded and private-label cough drops, mints and candies marketed under the Smith Brothers®, Daily C®, Sen- Sen® and Foxes® brands. In 2009, the company experienced distressed cash flow and was unable to obtain additional financing from its existing lenders due to a restrictive forbearance agreement.
Gordon Brothers Group evaluated F&F’s underlying enterprise value and, despite F&F’s lack of capital and credit availability, was ultimately drawn to the company’s brand portfolio, unique manufacturing profile and the real value of the company’s leveraged assets. Though F&F was constrained by a lack of working capital from existing senior lenders, Gordon Brothers Group saw potential in the future of the manufacturer. With proper oversight and additional capital availability, as well as improved market conditions such as an active new business pipeline and significant capacity under its existing infrastructure, Gordon Brothers Group believed that F&F’s negative EBITDA trends could be significantly improved.
Gordon Brothers Group acquired the senior debt of F&F Foods and, with the assent of F&F’s shareholders, immediately placed the company into Assignment for the Benefit of Creditors, an insolvency proceeding that operates under state law. Gordon Brothers Group then selected a professional interim management consultant to serve as Assignee, the person responsible for overseeing all financial and operational decisions.
As the secured lender, Gordon Brothers Group provided sufficient capital to fund F&F’s regular operations while closely monitoring all major financial decisions and expenditures on a weekly basis. Gordon Brothers Group also provided additional growth capital, allowing F&F to purchase key pieces of new equipment that was a necessary part of manufacturing a new product category. That influx of equipment, in turn, allowed F&F to acquire a new production contract from a key customer.
After effecting the turnaround of the business, Gordon Brothers Group sold its senior debt position in support of a going concern sale of all of F&F’s assets (by the Assignee) to Universal Holdings, an affiliate of GemCap and York Capital.
With Gordon Brothers Group’s support over the course of approximately one year, F&F Foods went from a significant operating loss to an 11% EBITDA profit margin. The successful turnaround of F&F Foods resulted in hundreds of jobs being preserved in the Chicago area, and the successful sale and reorganization of a "new" F&F Foods that is financially stable and poised for growth.