Kasper A.S.L., LTD.
Kasper A.S.L., LTD.
CASE STUDY:
KASPER A.S.L., LTD.
Kasper A.S.L., LTD was a leading international branded women’s apparel company. The company operated in three segments: Wholesale, Licensing and owned Retail. Kasper acquired Anne Klein in June 1999 to diversify and grow its business with the goal of increasing shareholder value. Revenues in 2000 reached $415 million, but the acquisition was poorly executed, leading to a series of crippling operating and merchandising problems. Kasper did not meet its financial projections during 2000, and in September of 2000, the company defaulted on its senior notes and secured bank debt.
With the bonds trading at 15-20 cents on the dollar and the stock trading for pennies, the Ad Hoc Bondholders decided to pursue an operating, financial, and strategic turnaround. The Committee retained Quest Managing Director Michael Appel to conduct a comprehensive strategic and operating review, which included analyses of competitive financial metrics, buying and merchandising processes, and operating practices.
Appel concluded that the new business strategy of diversifying into sportswear was sound, but execution by management was poor. Relationships with key retailers were strong and brands were well regarded, but were not being maximized. Financial metrics were substantially below those of major competitors in COGS, gross margin and SG&A. Company processes were antiquated and not representative of current best practices. Top management was incapable of running a complex, multi-vision group of brands and the scale of the Company was not large enough to make it competitive over time.
A three step blueprint was developed for maximizing stakeholder recoveries. First – hire a new CEO. In July 2001 John Idol, a highly regarded apparel executed was hired as CEO. Second, implement a detailed operating and strategic turnaround. Third, sell Kasper to a large apparel conglomerate that would pay a premium for this platform.
Kasper commenced a pre-arranged Chapter 11 case in February 2002. The newly formed Unsecured Creditor’s Committee retained Quest as financial advisors, with Michael Appel continuing to monitor the company’s turnaround performance, working closely with the Committee’s other advisors.
Fiscal 2002 results validated that the operational turnaround had been a huge success. Despite a $24 million reduction in net revenue, gross profit improved by $41.2 million, gross margin percent improved from 25.6% to 38.5% and EBITDA improved from a loss of $1.4 million in 2001 to a positive $46.8 million. During the Chapter 11 case, Kasper repaid its pre-petition bank debt in full.
With the turnaround in full swing and the company preparing to emerge from Chapter 11, the Company received a buyout offer from management and a private equity firm for $88 million. This offer was rejected, and a sale process commenced. In June of 2003 Kellwood Company, an apparel conglomerate agreed to purchase Kasper for $163.6 million in cash and stock, subject to higher or better offers. In August, Jones Apparel Group won the Kasper auction.
In November of 2003, the Chapter 11 plan was confirmed and in December, Jones Apparel completed the acquisition of Kasper for total consideration in excess of $270 million. Bondholders received full principal value plus pre and post-petition interest and the common shareholders received an unexpected $8.59 per share.
CASE STUDY: KASPER A.S.L., LTD.
Kasper A.S.L., LTD was a leading international branded women’s apparel company. The company operated in three segments: Wholesale, Licensing and owned Retail. Kasper acquired Anne Klein in June 1999 to diversify and grow its business with the goal of increasing shareholder value. Revenues in 2000 reached $415 million, but the acquisition was poorly executed, leading to a series of crippling operating and merchandising problems. Kasper did not meet its financial projections during 2000, and in September of 2000, the company defaulted on its senior notes and secured bank debt.
With the bonds trading at 15-20 cents on the dollar and the stock trading for pennies, the Ad Hoc Bondholders decided to pursue an operating, financial, and strategic turnaround. The Committee retained Quest Managing Director Michael Appel to conduct a comprehensive strategic and operating review, which included analyses of competitive financial metrics, buying and merchandising processes, and operating practices.
Appel concluded that the new business strategy of diversifying into sportswear was sound, but execution by management was poor. Relationships with key retailers were strong and brands were well regarded, but were not being maximized. Financial metrics were substantially below those of major competitors in COGS, gross margin and SG&A. Company processes were antiquated and not representative of current best practices. Top management was incapable of running a complex, multi-vision group of brands and the scale of the Company was not large enough to make it competitive over time.
A three step blueprint was developed for maximizing stakeholder recoveries. First – hire a new CEO. In July 2001 John Idol, a highly regarded apparel executed was hired as CEO. Second, implement a detailed operating and strategic turnaround. Third, sell Kasper to a large apparel conglomerate that would pay a premium for this platform.
Kasper commenced a pre-arranged Chapter 11 case in February 2002. The newly formed Unsecured Creditor’s Committee retained Quest as financial advisors, with Michael Appel continuing to monitor the company’s turnaround performance, working closely with the Committee’s other advisors.
Fiscal 2002 results validated that the operational turnaround had been a huge success. Despite a $24 million reduction in net revenue, gross profit improved by $41.2 million, gross margin percent improved from 25.6% to 38.5% and EBITDA improved from a loss of $1.4 million in 2001 to a positive $46.8 million. During the Chapter 11 case, Kasper repaid its pre-petition bank debt in full.
With the turnaround in full swing and the company preparing to emerge from Chapter 11, the Company received a buyout offer from management and a private equity firm for $88 million. This offer was rejected, and a sale process commenced. In June of 2003 Kellwood Company, an apparel conglomerate agreed to purchase Kasper for $163.6 million in cash and stock, subject to higher or better offers. In August, Jones Apparel Group won the Kasper auction.
In November of 2003, the Chapter 11 plan was confirmed and in December, Jones Apparel completed the acquisition of Kasper for total consideration in excess of $270 million. Bondholders received full principal value plus pre and post-petition interest and the common shareholders received an unexpected $8.59 per share.
