Strictly by the Book

Situation

• Strictly by the Book, a remainder book distributor based in Fall River, MA, that sold an array of books to customers like Barnes & Noble, Borders and Anderson Distribution, was put into Assignment for Benefit of Creditors (ABC) in November 2009. Inventory was listed as 18 million assorted titles but poor inventory control meant there was no way to confirm the exact quantity, quality and mix of the inventory. While there was initial interest from a number of asset recovery firms, ultimately interest waned, as no one wanted to assume the risk of the unknown inventory. Gordon Brothers Group’s Commercial & Industrial Division, leveraging many years of experience and expertise, performed on-site due diligence and determined that once sorted and organized, the inventory would have significant upside value.

Solution

• Gordon Brothers Group purchased all inventory, intellectual property and equipment with a significant guaranteed return to the Secured Lender and Assignee. Gordon Brothers Group felt that while there probably was not as much inventory as had initially been stated, the quality of the inventory once sorted would be sufficient to guarantee the return.
• Gordon Brothers Group invested over $500,000 and assumed all labor and material costs necessary to sort and organize the inventory. After determining there were approximately 9 million books between two Indiana facilities and two Massachusetts facilities, Gordon Brothers Group contacted buyers and created multiple valuable pricing programs.

Results

• Gordon Brothers Group sold all inventory within 18 weeks to approximately 40 to 50 buyers, including both retailers and distributors. In addition, Gordon Brothers Group assumed all account receivable risk associated with the sales.
• Gordon Brothers Group sold the Internet business (including inventory, fixtures and IP) as a going concern. The website was sold as a turnkey operation and the Strictly by the Book website was incorporated into an existing platform rebranded as BHFObooks.com.
• The bank was guaranteed a minimum return; however, Gordon Brothers Group exceeded the originally set expectations despite there being a lower-than-expected inventory unit count. The additional revenue was proportionally returned to the Estate.