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HIGH-END TEXTILES MANUFACTURER LOSES VOLUME AS INDUSTRY SHIFTS OVERSEAS — Company Looks to Carl Marks to Bolster its Business Structure
Problem
With multiple plants in the United States, a $135 million designer and manufacturer of high-end textiles for the home and contract furnishings industries began to falter when the manufacturing of textiles quickly moved overseas. Although this company had a wholly owned Mexican subsidiary, the rapid, industry-wide shift to overseas manufacturing resulted in a sudden and significant decline in volume.
Such declines are problematic because the company, which had operated since 1932, had an extensive U.S.-based fixed asset structure, including yarn dyeing, weaving, and finishing operations. Lower volumes, combined with a large fixed-cost structure, drove significant losses. The company’s bank group already had written off $100 million and was looking for an exit.
It became obvious the company could no longer survive in its current form. Its fixed asset infrastructure was too much of a drag on cash flow, given the reduced volumes.
Solution
The company engaged Carl Marks Advisory Group (CMAG) to assess the situation and devise a revitalization plan. CMAG also assumed responsibility for the management of the company, providing interim management for the positions of chief restructuring officer, chief operating officer and chief financial officer.
Based on its assessment, the Carl Marks management team took several key steps to reinvigorate the business, including the following:
- Taking the company into Chapter 11
- Shedding unnecessary infrastructure by rejecting leases
- Re-energizing two viable niche businesses, packaging them and also the Mexican subsidiary for sale to strategic buyers with the help of an investment banker
- Selling off all other under-utilized assets
These initiatives successfully restarted the two viable business units by bringing together the management teams and carefully reopening the raw materials supply chain after the Chapter 11 filing. During the peak of the company’s distress, the operations of these two units had nearly come to a full halt.
The Carl Marks team also led the 363 sale process that ultimately resulted in obtaining nearly $30 million for the two businesses, the Mexican subsidiary and the under-utilized assets.
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