UCC Supports Company Timeline to Sale and Price Increases 50%

Harper Brush Works

Fairfield, Iowa

Challenge

100 year old family-owned maker of brooms and brushes. $25 million in sales. $10 million debt.


  • Bankruptcy was due to several factors including; increased competition, loss of several significant customers and an unsustainable debt structure
  • Sales had fallen from $53 million to under $25 million
  • Secured lenders believed they were under-collateralized and pushed for immediate liquidation of Harper and refused to provide DIP or use of cash collateral
  • Harper initially filed for Chapter 11 with hopes to reorganize, however the company changed its path and decided to sell its assets under 363 bankruptcy protection
  • Order cancellations and inventory issues were mis-managed and customers were fleeing on a weekly basis
  • Unsecured creditors willing to forego financial consideration to preserve jobs and a customer but needed to convince lenders to allow time for a reorganization or a sales process

Solution

  • Engaged as financial advisor to the Unsecured Creditors Committee (UCC) who were owed $4 million
  • On behalf of the unsecured creditors committee, MorrisAnderson, worked with the debtor’s management team to develop a list of scenarios for achieving the greatest recovery for the creditors and the business
  • Quickly performed financial analysis of working capital needs and determined whether company could survive from cash collateral only, without a DIP loan
  • Served as expert witness for unsecured creditors committee to support motion for use of cash collateral to provide time to pursue alternatives to liquidation

Results

  • Successfully won motion to use cash collateral, providing time for company to pursue a sales process
  • Stalking horse buyer identified that resulted in sale of company instead of liquidation
  • Gross proceeds from auction increased nearly 50% from stalking horse bid
  • Company purchased and manufacturing continues, preserving nearly 65 jobs and a customer for local suppliers in a town where Harper Brush was the largest employer and enterprise