The company reports that "debtor-in-possession" (DIP) financing for the bankruptcy proceedings has been arranged with Recoton's existing lenders, which include Heller Financial and General Electric Capital Corporation. Upon approval, Recoton reports, the DIP financing will provide immediate funding to support the company's ongoing business requirements.
Founded in 1936, Recoton develops, manufactures, and markets several brands of home and mobile audio products, video and computer game accessories, and other consumer electronic accessories. The company claims it offers more than 3000 products, including those by such brands as Advent, Ambico, Acoustic Research, Discwasher, InterAct, Jensen, Linear Research, Recoton, Road Gear, Spikemaster, and Sprint.
In December 2002, Recoton sold its interest in its AAMP subsidiary to an affiliate of ICV Capital Partners, and dealt audiophile favorite NHT to Rockford Corporation for total said to amount to $35 million.
Recoton had announced in 2002 that it would implement and substantially complete restructuring of operations to reduce overall debt structure, enhance cash flows, and restore the company to profitability. This plan clearly fell short of expectations, prompting the company's Robert L. Borchardt to observe that the voluntary action was initiated "to protect the value and viability of Recoton's operations and ensure that our customers receive necessary products, services, and support while we seek to sell Recoton's assets as a going concern."
The company specifies that terms of the DIP financing require Recoton to sell its remaining businesses and all related assets and apply the proceeds from such sales to reduce Recoton's outstanding indebtedness. These sales, which are subject to the approval of the bankruptcy court, are expected to be consummated by June 30, 2003.
Recoton has retained Stroock & Stroock & Lavan as its bankruptcy counsel and Kroll Zolfo Cooper as its financial advisor. Recoton has also retained Jefferies & Company as its investment banker to market Recoton's assets, and that company has received "several expressions of interest" from potential bidders.