The sale of Menomonee Falls-based catalog printer Arandell Corp. to a group led by a Pennsylvania private equity firm is now awaiting the approval of a bankruptcy judge after the company did not receive additional qualifying bids for its assets.
Arandell filed for bankruptcy in August. The company ended 2019 with more than 600 employees but had reduced its staff to around 500 when it filed for bankruptcy.
The third largest printer of catalogs in the country, Arandell counts blue chip retailers and brands among its customers. Like many in the printing industry, the company has been challenged by store closings brought on by the growing popularity of e-commerce. Those issues were only exacerbated by COVID-19, which brought additional closures and bankruptcies and prompted some customers to push out their payments.
After its bankruptcy filing, Arandell secured a $31.3 million stalking horse bid in late September from Arandell Acquisition Corp., an entity formed by Pennsylvania-based private equity firm Saothair Capital Partners and an affiliate of Washington D.C.-based private investment firm Farragut Capital Partners. Farragut Mezzanine Partners III L.P. is among Arandell’s junior secured creditors.
The deadline for other bids was Friday afternoon. On Monday, the company notified the bankruptcy court that it had not received additional qualified bids and would be cancelling its planned auction.
Arandell will also be seeking approval of the sale to AAC at a Nov. 24 hearing.
The company also resolved issues with the lease for its headquarters and printing facility in Menomonee Falls.
Arandell executed a sale-leaseback of the facility in 2016. After the bankruptcy case was filed, the company’s landlord, an affiliate of New York-based real estate investment trust W.P. Carey Inc., sought to force Arandell to pay around $1.06 million in unpaid rent.
The landlord said the two sides discussed an agreement that would have deferred rent payments, but no final deal was ever reached. In its debtor-in-possession financing documents, however, Arandell said its rent was either abated or deferred based on an agreement in principle with W.P. Carey.
In a lease amendment filed with the court last week, the two sides agreed to apply around $700,000 from Arandell’s security deposit to rent that would have been due in April and July. Another $880,000 will be paid over the next two years by AAC, the buyer.
The annual rent for the facility was also reduced from $2.1 million to $1.9 million with a previously included inflation adjustment removed.
In exchange, the landlord will receive a general unsecured claim of almost $5 million to cover most of the economic loss from amendment.
“The Lease Amendment provides for a fair and efficient resolution of many complicated and burdensome disputes which have hampered the Chapter 11 Cases and compromised the Sale Process, and its approval will allow the Debtors to close the Sale and maintain uninterrupted operations for the benefit of all interested parties,” Arandell attorneys wrote in court filings seeking approval of the deal.
A potential strategic buyer had negotiated with Arandell prior to AAC being selected as the stalking horse bidder. The buyer likely would not have been interested in assuming the lease if bought the company, according to court filings.
AAC also reached an employment agreement last week with Brad Hoffman, president and chief executive officer of Arandell, for him to stay with the new company. Terms of the deal were not publicly disclosed.