Ending a cash starvation that crippled the operations of Winterland Prods., the legendary San Francisco-based entertainment merchandising firm, the company on Monday inked a recapitalization agreement with investors designed to give the firm’s management full control of the company.
It also allows the company to sever ties with MML, a holding company owned by controversial businessman Morton Lapides, whose business tactics and highly leveraged purchase of Winterland from MCA in August 1996 paralyzed the venerable firm.
The firm was sold in 1988 to MCA, which sold it eight years later in an leveraged buyout to MML Inc. Lapides failed to make key loan payments in January, which stifled Winterland’s business.
However, the recapitalization comes on the heels of Winterland filing for bankruptcy protection in U.S. District Court on Aug. 8 in order to keep its doors open. It filed a pre-packaged Chapter 11 in which it negotiated settlement terms in advance of the filing with its creditors and suppliers. The tactic allows for a speedier emergence from Chapter 11 and typically reduces legal and financial costs and fees incurred.
Terms of the deal include converting fully three-quarters of the company’s loans to equity and longterm debt, and the creation of a stock option plan for key employees.
Employees will also get long overdue raises; many haven’t had a pay increase in more than three years.
“The filing will allow us to move forward without the financial equivalent of a boat anchor,” Donn Tice, CEO of Winterland told Daily Variety, referring to the impact that MML’s/Lapides’ obligations had on Winterland’s operations. “We’re a much stronger company today than we were yesterday. We’re making a fresh start after a tough year.”
Winterland also nabbed an additional $5 million in financing provided by Cerberus Partners LP and Gordon Brothers Capital Corp.
As part of the plan, Cerberus and Gordon Brothers will convert approximately $6 million of their loans to equity and restructure the remainder to provide Winterland with strong, sustainable capitalization.
Tice also said the agreement ensures that the company and its 350 employees will stay and grow in San Francisco.
The firm, founded in 1972 by impresario Bill Graham, is a leading producer of licensed and private-label apparel and related merchandise. Graham died in a helicopter crash in 1991.
Artists on Winterland’s roster include major names such as Madonna, Marilyn Manson, Boyz II Men, Diana Ross and classics such as Jimi Hendrix, Led Zeppelin and the Doors. The firm’s private-label clients include such names as DKNY, Tommy Hilfiger, Levi Strauss & Co. and Universal Studios.
Tice expects Winterland to emerge from Chapter 11 in six months.