2014 Retrospective—News and Deal Highlights
Date December 2014
2014 has been a year of tremendous positive change here at Gordon Brothers Group. While our transaction volume was strong—making this a standout year on that basis alone—2014 also saw a number of strategic and leadership developments, which will contribute to our performance for many years to come. Below we’ve detailed some noteworthy transactions as well as key news highlights from the past year:
This past fall we announced that Michael Frieze would assume the role of Chief Investment Officer and remain Chairman of the Board of Directors while I was appointed Chief Executive Officer. This announcement was preceded by the appointment of Michael Muldowney as Chief Financial Officer in May of this year. Just this month, we also made two additions to our management team with the hiring of Ian Levine and Blair Nelson. As Managing Director, Business Development, Ian is responsible for overseeing the Business Development and Marketing efforts firm-wide. As Managing Director, Corporate Development, Blair is responsible for the development and execution of strategic initiatives across the firm. These new additions join the most tenured disposition, appraisal and real estate teams in the industry. Together, our group works as a partnership to guide the firm’s future strategic growth.
2014 saw significant international growth for the firm with the opening of two new Gordon Brothers Europe offices in Cologne, Germany and Milan, Italy—with Madrid, Spain and Bristol, UK coming early in the first quarter of 2015. As part of this expansion, we also made several key international appointments including Siegfried Kobal, Director, Operations; Olaf Galler, Managing Director, Retail & Consumer Products D-A-CH (Deutschland, Austria & Switzerland); Dr. Andreas Kemper, Director, Retail & Consumer Products; Maria Samudovska, Investment Director and Scott Ronaldson, Investment Director, Italy. We see significant potential to leverage our platform in other markets throughout the world and will continue that growth in Europe and elsewhere.
Gordon Brothers Finance Company
This past fall, Gordon Brothers Group completed a transaction with BlackRock Kelso Capital to launch Gordon Brothers Finance Company. As part of the transaction, the vast majority of loans managed by GB Credit Partners were transferred to Gordon Brothers Finance Company and the same team, led by Patrick Dalton, continues to originate, underwrite and manage loans to middle market companies in the U.S., Canada and Europe. Through the new partnership with BlackRock Kelso Capital, Gordon Brothers Finance Company will have access to long-term capital to help grow the loan portfolio and will continue the same business of providing junior secured loans and partnering with senior ABLs. Gordon Brothers Finance Company remains headquartered in Boston and maintains an exclusive partnership with Gordon Brothers Group to provide deep valuation expertise to support the execution of transactions where other lenders may not.
Retail Division Transactions
Gordon Brothers Group’s Retail Division prevailed as the highest bidder in a court authorized auction by providing an aggressive equity guarantee for the closure of all Dots stores following the company’s Chapter 11 bankruptcy filing. Dots was a national discount retailer of women’s fashion apparel and accessories that faced competitive pressures, which ultimately forced its closure. Gordon Brothers Group invested additional capital to supplement the merchandise assortment to enhance the results of the disposition of the company’s existing $120 million of inventory. We also disposed of the retailer’s furniture, fixtures and equipment. Our retail team leveraged the company’s e-commerce channel and managed its email marketing and social media presence to optimize returns.
The Retail Division of Gordon Brothers Group, as part of a joint venture project, provided an equity guarantee for the closure of all 366 Coldwater Creek stores following the company’s bankruptcy filing this spring. The joint venture managed all aspects of the sale, including operating the company’s social media channels, website and customer database to optimize the going-out-of business sales. Additionally, Gordon Brothers Group collaborated with the company’s management team to select and purchase additional merchandise to augment the inventory assortment throughout the sale, enhancing the results of the project. DJM Real Estate, the real estate affiliate of Gordon Brothers Group, coordinated the extension of over 90% of existing store leases to maximize the results of the sale.
Brand Division Transactions
Since Gordon Brothers Group’s acquisition of Coby Electronics, including its intellectual property assets, in 2013, the Brand Division has continually worked towards rebuilding the brand as a value offering to discerning consumers. Earlier this year, Gordon Brothers Group entered into a license agreement for core products in North America and the brand’s re-launch is underway. COBY® branded consumer electronics products can be found on many retailers’ shelves today and a line of new upcoming products will be exhibited at the CES show in January. Several licenses are in the process of being negotiated for expansion of the brand internationally.
The Valuation & Advisory Services Division provided a comprehensive appraisal of the trade name and inventory of this 180 year-old manufacturer, distributor and retailer of quality outdoor clothing. The valuation considered wholesale, retail, internet and licensing channels and applied to the Woolrich Original, Woolrich White Collection, Woolrich John Rich & Bros., and Woolrich Woolen Mills brands. The analysis followed a discounted cash flow approach and included a broad competitive assessment of the market as well as an evaluation of an extensive licensing relationship in the European and Asian markets.
DJM Real Estate Transactions
DJM Real Estate, along with its partner CBRE Canada, successfully terminated 80 Big Lots leases in Canada as part of the company’s strategic exit of the country. Headquartered in Columbus, Ohio, Big Lots is the nation's largest broadline closeout retailer, operating more than 1,400 retail stores across 48 states throughout the U.S. Over the course of the six month timeframe, DJM Real Estate greatly exceeded the retailer’s cost projections for exiting the Canadian market, better positioning the company to focus on its ongoing operations in its priority markets.
DJM Real Estate provided disposition services to Food Lion as part of an ongoing, two year project to dispose of 125 closed supermarkets and one distribution center. DJM Real Estate followed a rigorous project management process with deep analytics and weekly client calls, supported by a comprehensive field team covering eight states. Within the first nine months alone, DJM Real Estate helped the company in selling, terminating, subleasing, or assigning the leases and owned real estate for approximately half of the initial store group. Today, fewer than 35 stores remain in the project as DJM Real Estate continues its ongoing work with this major, national grocery chain.
GB Energy Partners Transactions
Green Field Energy Services
In March, the Commercial & Industrial Division of Gordon Brothers Group received sale order approval by the bankruptcy court for Green Field Energy Services’ entire portfolio of equipment and inventory assets and undertook its immediate disposition. The assets of the well service provider, which specialized in turbine-powered hydraulic fracturing equipment, were valued at more than $250 million and included over 3,500 pieces of new and late model equipment. Gordon Brothers Group provided a suite of services to the company, including an asset appraisal in early fall of 2013, followed by a $30 million DIP facility issued by GB Credit Partners later that year.
The appraisal and valuation platform of GB Energy Partners performed an intangible valuation of the usage rights, as well as a tangible asset valuation of the machinery & equipment of a division of Pinnergy, Ltd., a diversified energy services company founded in 1992. The Company is one of the largest independent oilfield services companies, providing fluid management, drilling coverage and waste management services across Louisiana and Texas. Gordon Brothers Group appraised the Oil & Gas Waste Disposal division, which operates ten active, revenue-producing salt water disposal wells on both a Net Orderly Liquation as well as a Fair Market value basis. In order to reflect the most accurate and comprehensive assessment, the disposal wells were valued individually, taking into consideration all valuation approaches (income, asset, and market), which were then weighted based on the facts and circumstances of each well to derive a value.
Valuation & Advisory Services Division Transactions
Gordon Brothers Group’s Valuation & Advisory Services Division appraised Brooks Brothers Group Inc., the country’s oldest clothing retailer, founded in 1818. The iconic American brand operates over 240 company-owned full line and outlet retail stores, as well as direct to consumer and e-commerce channels through its catalog and website. In order to maximize value while providing the most thorough insight into the company’s Net Orderly Liquidation value, Gordon Brothers Group leveraged the chain’s internet sales capacity in conjunction with its brick and mortar sales for the full line and outlet concepts, both individually and on a consolidated basis.
The Valuation & Advisory Services Division of Gordon Brothers Group provided an appraisal of Bermex, a manufacturer and distributor of solid wood casual and formal furniture. The company maintains 22 locations plus additional consigned/showroom locations and sells its goods through retailers such as Babies “R” Us, Toys “R” Us, Costco and Sears Canada, among other stores. The appraisal contemplated a single selling scenario of the company’s raw materials, work-in-process and finished goods within the Shermag and BDM U.S. and Canada divisions.
Commercial & Industrial Division Transactions
Gordon Brothers Group’s Commercial & Industrial Division purchased the assets of Flavours, a beverage manufacturing and packaging company, and undertook a turnaround of the business. Following financial strain the company and its lender pursued an article 9 secured party sale of the company last fall. Gordon Brothers Group assessed the assets on an in- place basis as opposed to being sold piecemeal and successfully outbid other parties for the machinery & equipment, inventory and accounts receivable. Gordon Brothers Group worked to keep the company in a “warm state”, preserving jobs and asset values. Ultimately a group of former employees invested in the business and assumed operations with support from Gordon Brothers Group, continuing the company’s rebound and maintaining stable operations.
Propex, a leading manufacturer of industrial textiles, made the strategic decision to close its Nashville, Georgia facility, which specialized in the production of carpet backing materials. Gordon Brothers Group’s Commercial & Industrial Division acquired the real estate and machinery & equipment and facilitated its sale. Gordon Brothers Group sourced buyers for the real estate, looms, extrusion equipment and all other assets within six months of its purchase, while also providing the company with immediate payment for the assets and certainty in exiting the facility to focus on ongoing operations.
Gordon Brothers Europe Transactions
Gordon Brothers Europe worked with Endless on a retail project to wind down a proportion of a store estate, as part of an overall restructuring program to return the retailer to profitability. Endless LLP is a UK based private equity investor and looks to support buyouts, non-core acquisitions from larger groups, turnarounds and financial restructurings.
Gordon Brothers Europe completed the largest, most complex European retail asset disposition in history. The German DIY chains, Praktiker and Max Bahr, were fully closed. The project involved the closure of 281 stores within seven months, clearing over €800m of retail inventory. Gordon Brothers Europe provided a guarantee of the results, maintained a strict schedule and financially secured the transaction by providing a cash deposit in excess of €200m within seven days.
Gordon Brothers Japan Transactions
Following severe flooding, a Japanese precision rubber roller manufacturer made the decision to close its Thai manufacturing operations. Gordon Brothers Japan was retained as an advisor for the disposition of over 200 pieces of machinery & equipment valued at $8.6 million at original cost, as well as manufacturing facilities and real estate valued at approximately $4 million. The machinery & equipment were sold to international buyers across Asia, including from Korea, Thailand, Malaysia, and Japan.
Variety Goods Retailer
In June, Gordon Brothers Japan undertook a large scale equity-based disposition project for a well-known variety goods retailer with inventory totaling $13million at retail. The project involved discount sales for approximately 50 stores, including three new store openings and wholesale operations. The project enabled the company, which has never undertaken discount sales, to monetize aged inventory and streamline its ongoing operations.
To our clients, partners and friends, we thank you for a wonderful year. We are tremendously excited about what we have achieved in 2014 and how it positions us for continued growth for many years to come. We wish you the very best in the coming year and look forward to continuing to work with you to manage risk, maximize value and plan for the future. Happy holidays!