Avadim’s Black Mountain expansion won’t happen, he filed for bankruptcy
Avadim Health Inc., the Asheville-based skin care products company that announced ambitious plans in 2016 to build a $ 20.4 million facility and hire 551 workers at Black Mountain, has filed for bankruptcy. 11.
The company has also agreed to sell “substantially all of its assets,” according to a press release from the company. But Avadim is not going bankrupt, the documents say.
“These developments are part of a plan to significantly strengthen the company and best position it for a long and prosperous future,” the statement said.
The company has estimated assets between $ 10 million and $ 50 million, but its estimated liabilities range from $ 100 million to $ 500 million. The Chapter 11 filing indicates that Avadim has between 200 and 299 creditors who owe money.
Avadim owes its major lenders more than $ 79.6 million, according to bankruptcy court documents.
The record lists the 35 creditors with the largest bad debts, ranging from $ 5.3 million owed to a Georgian company to $ 21,677 in debt owed to a company in Nashua, New Hampshire.
The file also lists hundreds of “equity holders” – those who bought Avadim common stock – who will be affected by the bankruptcy. These include investors in the Asheville area, according to the bankruptcy filing.
While Avadim is a private company, as of 2017, the company sold common stock in “several private placement transactions,” according to the bankruptcy filing.
As of September 30, 2019, Avadim had 16,940,379 common shares outstanding, held by approximately 1,300 shareholders. In February 2020, Avadim abandoned its plan to IPO of 5 million ordinary shares.
A “hunted horse” agreement
The statement said that Avadim’s existing lender, Hayfin Capital Management, entered into a binding purchase agreement and committed to “debtor-in-charge financing,” which, if approved by the bankruptcy court , will allow Avadim to respect its sales process. A “stalking horse bid” is an initial bid on the assets of a bankrupt company, which “sets the bar for low-end bids so that other bidders cannot underbid on the purchase price”, according to Investopedia.
Asheville-based Avadim also announced that it has retained investment bank SSG Capital Advisors, LLC “to initiate full marketing of its assets to other potential buyers to ensure it receives the highest price. and the best “.
“Our goal is to pursue a transaction that maximizes the value of the business and ensures that we have the resources and flexibility to invest and grow the business,” said Keith Daniels, director of restructuring at Avadim, in the press release. “We will continue to create and market world-class products, including our Theraworx line, which our customers love. “
Avadim, founded in 2007, plans to continue its normal business activities throughout the restructuring.
“We are confident that this action provides us with the most efficient and effective way to continue a transaction while allowing us to meet financial challenges and better position the company for the future,” Daniels said in the statement. . “To be clear, the action has no impact on our day-to-day operations or our ability to continue to serve our customers.”
Avadim filed the case in the US Delaware District Bankruptcy Court because it was incorporated there.
Black Mountain Mayor Larry Harris said on June 10 that he had not spoken directly with officials at the Avadim company but had been alerted to the bankruptcy filing.
“I don’t know if that surprised me that much,” said Harris, a certified public accountant and financial planner. “In an earlier communication from Avadim, it was known that they were looking for an IPO (IPO), and the reason you are doing it is for funding, to pursue your business goals, etc.”
The IPO market has been pretty strong, but Avadim’s has not gone up, Harris noted.
In December 2020, Avadim CFO Joe McQuire said plans for expansion at Black Mountain were tied to the IPO.
“Our initial plans for the facility centered on funding received from the proceeds of an initial public offering of our shares in early 2020,” McGuire said via email on December 21, 2020. “These plans have been thwarted by volatility of the stock market caused by COVID-19. “
McGuire said the company is evaluating its alternatives and will release “the news to the public when a plan is solidified.” The bankruptcy filing came on May 31 of this year.
At the end of last year, McGuire said Avadim had around 180 employees and sales remained strong, with third quarter 2020 net sales – around $ 12 million – representing the “second best quarter. of our history ”.
The bankruptcy filing says Avadim now employs 100 workers, almost all full-time.
Before the pandemic, the company was experiencing strong growth. Bankruptcy filing says that as of mid-2016, Avadim had not yet established a retail presence, but its products were in use in around 60 acute care hospitals, as well as 100 nursing homes. and other long-term care facilities.
In the first quarter of 2020, Avadim was present in 250 acute care hospitals, more than 750 nursing homes, and it had products in more than 47,000 pharmacies. Additionally, between 2017-2019, Avadim’s net revenue increased from $ 10.8 million to $ 45.8 million.
But the company is heavily in debt and struggling to make payments. Court documents indicate that since September 26, 2019, “numerous cases of default have occurred by the company” and that the parties concerned have entered into numerous forbearance, extensions and reinstatement agreements.
The site is ready
Mayor Harris said Avadim had “always been very kind” and kept the city informed of his situation. Harris noted that the Chapter 11 bankruptcy allows for the reorganization and continuation of operations of a company, “not its dismantling.”
The city spearheaded efforts to prepare the Black Mountain Commerce Park site, which included water and sewage facilities, for Avadim. The project received a federal economic development grant and a grant from the state’s Golden Leaf Foundation totaling $ 1.8 million, equally, said Harris.
It was “a big enough project” to bring in water and a pumping station, Harris said, noting that it also benefits the city with better water pressure.
He remains optimistic that Avadim will always be relocating to the park. About six months ago, Harris noted, Avadim CEO Steve Woody briefed the alderman’s board and told them the company was hoping to have a few good quarters of sales that would lead them on. the road to success.
“So when I saw that they were doing a reorganization, I will be very honest with you, I think that could probably be a good thing, because it allows them to restructure themselves to put themselves in a position where they could go. forward, ”Harris mentioned. “It was probably the best thing they could do.”
Avadim describes itself as “a high growth health and wellness company that sells topical products to improve immune health, neuromuscular health and skin barrier health.”
Avadim has previously said its expansion will create 551 new jobs. In 2016, Buncombe County approved $ 881,960 in incentives for the business, with grants over a five-year period starting in May 2022.
In 2017, Avadim announced that it would build the new facility and create jobs by the end of 2021, including 100 jobs with an average annual salary of $ 89,440, 161 jobs paying $ 64,480 and 290 jobs at 30 $ 160.
County incentives depended on construction and hiring.
Clark Duncan, executive director of the Asheville and Buncombe County Economic Development Coalition, said: “No incentive from Buncombe County has been extended, so there is no complication there. “
He also said it was “too early to perform an autopsy” on Avadim.
“Unfortunately, this continues to be an expectation (proposal),” Duncan said. “If an investor comes in, recognizes the opportunity, injects cash and keeps them on track for growth, that could be a good thing.
The delay in the IPO prevented the injection of much needed capital, he added.