Norwood Promotional Products, one of the leading suppliers of imprinted promotional products, filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on May 5, 2009.  According to Norwood’s Declaration in Support of its Bankruptcy Motions (the “Declaration”), Norwood’s bankruptcy was the result of weakening demand for its products, an inability to meet debt obligations, increased production costs and flooding at one of its manufacturing facilities.  Based in Indianapolis, Indiana,  Norwood employs over 2,200 employees and has assets of $150 million against liabilities of $205 million.  In 2007, Norwood’s annual revenue reached $325 million.

Objectives in Bankruptcy

In the months leading up to its bankruptcy,  Norwood successfully refinanced a revolving credit facility, however, it was unable to refinance its mezzanine debt through a high yield offering.  Once Norwood realized that it could not fully refinance its debt, it began discussions relating to the sale of assets under section 363 of the Bankruptcy Code.  To effectuate a 363 sale, Norwood approached its lenders and a potential purchaser to see if someone would agree to serve as the stalking horse bidder during the sale of assets.

According to Norwood’s Declaration, Norwood ultimately entered into an asset purchase agreement with Promotional Holdings, LLC.  Under the agreement, the buyer agreed to purchase Norwood for $132.5 million. By filing bankruptcy, Norwood seeks to either sell its assets to Promotional Holdings, LLC, or find a better offer through a chapter 11 auction.

Norwood’s Financials

Upon filing for bankruptcy, Norwood filed a motion seeking approval of debtor in possession financing.  Pursuant to the motion, Norwood seeks authority to obtain a $30 million postpetition revolving credit facility.  Norwood needs debtor in possession financing in order to maintain supplier relationships, pay employees and meet other obligations.  As reflected in its bankruptcy petition, Norwood lists the following companies as holding the five largest unsecured claims:

  • Unisource Worldwide  … $931,000
  • UPS … $807,000
  • Titleist … $667,000
  • GPE … $358,000
  • Callaway Golf … $259,000

This bankruptcy proceeding is before the Honorable Peter J. Walsh, former Chief Judge of the Delaware Bankruptcy Court.