Case Studies

Preserving Business Value for Creditors through Restructuring and New Ownership in the Consumer Products Industry

Restructuring/Interim Management/Chapter 11/Strategic and Operational M&A

Norwood Promotional Products was a $300+ million supplier of customized, non-apparel promotional products, the second largest U.S. supplier of non-apparel promotional products, and the leading market share company across several key industry product categories including calendars, writing instruments, golf products and awards. Throughout 2007, Norwood faced difficulties maintaining its revenue base during recessionary economic times, significantly increasing the company’s debt expense.

With a balance sheet that included approximately $134 million in Term A debt, $20 million in mezzanine notes and a debt ratio of greater than 1.2, the company struggled to service its annual interest expense of approximately $25 million.

Norwood implemented a number of internal financial, operational and cost cutting moves to try to support the obligations, but by the beginning of 2008 found themselves out of compliance with various covenants on its existing facilities. Complicating matters, in June 2008 the Company’s Cedar Rapids facility was devastated by a flood, forcing Norwood to evacuate the facility and suspend operations. The Cedar Rapids facility supplied Norwood’s entire writing instrument product line, which accounted for approximately 10% of total sales. The flooding of the Cedar Rapids facility ultimately resulted in a loss of approximately $17 million.

In March 2008, Norwood engaged Mackinac Partners to lead the refinancing of its revolver and Term A credit facilities. By this time, the unprecedented financial crisis of 2008 was well under way and had drastically affected the banking system and financial markets. Uncertainties in global economic conditions resulted in a tightening of the credit markets, limited liquidity in global financial markets and extreme volatility in credit, equity and fixed income markets.

These factors made it nearly impossible for Norwood to refinance its existing debt obligations or otherwise recapitalize its balance sheet. Despite this unfortunate timing, Mackinac and Norwood were able to successfully refinance Norwood’s $40 million revolver. However, there was no market for Norwood’s approximately $130 million Term A facility. Furthermore, Norwood’s sales were greatly affected by the deteriorating economic and recessionary conditions. By the last quarter of 2008 and first quarter of 2009, comp sales had declined greater than 15%, and by the second quarter were down more than 25%.

During the company’s continued efforts to complete an out-of-court restructuring, Mackinac Partners was integral in assisting stakeholders of managing the day-to-day challenges of a company in financial and operational crisis. Keith Maib, Senior Managing Director at Mackinac Partners became a key leader and advisor to the company and moved to an interim CFO role, overseeing financial operations and continued negotiations surrounding a possible recapitalization.

The impact of the recession on consumer and business spending, subsequent loss of sales, and an unfavorable capital structure seriously impacted the recapitalization efforts. After exhaustive attempts by Norwood and its advisors, it became clear that the company was unable to effectuate a successful out-of-court restructuring. After reviewing all possible alternatives, management concluded that the company’s best course of action was a sale of substantially all of its assets under §363 of the Bankruptcy Code.

Mackinac Partners helped the company file for bankruptcy protection, and just prior to filing, the team negotiated the terms of an asset purchase agreement with a stalking horse bidder. Norwood Promotional Products filed for Chapter 11 bankruptcy protection on May 5, 2009 and filed a motion to sell the company via §363 of the Bankruptcy Code as part of its first day motions. The Debtor’s proposed timeline was only 45 days from filing to auction, which was deemed necessary to preserve the value of the business.


Throughout the next six weeks, the debtor and its advisors worked diligently in their respective roles to manage the bankruptcy process, maintain current business operations, and generate an active sale process. During this timeframe Houlihan Lokey and Mackinac Partners canvassed the marketplace, eventually discussing the transaction with over 150 potential buyers. Mackinac Partners developed numerous projection models which provided multiple sales scenarios and drew attention to the underlying value in the Norwood business. And the entire transactional team expeditiously responded to all due diligence requests.

These efforts, combined with the team’s negotiating prowess, led to valuations that may not have been otherwise realized given the challenges facing the business. Ultimately, three serious contenders emerged on the eve of the auction – the stalking horse bidder, a strategic buyer and a group led by the Norwood’s Term A lenders.

Our combined transactional team was able to complete this transaction at a rapid pace, protecting company value while obtaining a very attractive price. With a stalking horse bid of approximately $111.0 million (net of final adjustment amounts), the §363 auction process bolstered a total net consideration of $162.5 million.

This represented a 46.4% premium compared to the opening price and, with $26.5 million in TTM EBITDA, a multiple equal to 6.1 times. This was a remarkable outcome for the distressed sale of a company with declining sales in a recession and with a future dependent on the unknown timing and magnitude of a macroeconomic recovery.

A mere 45 days after the Company’s Chapter 11 filing, Judge Peter J. Walsh approved the sale of Norwood Promotional Products to the strategic buyer – BIC Graphic USA, a subsidiary of Société BIC S.A., the $2 billion manufacturer of stationery products, lighters and shavers. Within just 14 days of the sale hearing, the transaction was complete.

The terms of the sale also provided for:

  • Estimated recovery to unsecured creditors of approximately 90% (including the assumption of liabilities)
  • Estimated recovery to Term A lenders of approximately 75%
  • A successor company that became the number one market share leader in promotional products, performing very strongly in the marketplace