Thomas Nelson, Inc.

Background

Thomas Nelson is the largest Christian publisher in the world and the seventh largest book publisher in the United States.

During the economic recession, liquidity and operating performance was impacted severely by the rapidly deteriorating market place and slower than expected improvements related to operational initiatives. The global downturn disproportionately affected religious book publishing:

  • US book publishing (per AAP and excluding higher education) decreased 5.0% in 2008 and 0.6% in 2009; whereas, religious publishing fell by 7.6% and 9.1% over the same periods.
  • Further, broad-based discounting and depressed margins severely impacted the bottom line performance.

In late 2009, Thomas Nelson failed financial covenant tests and the company was concerned that they may need to file for Chapter 11 protection on an emergency basis

Project

Zolfo Cooper was retained to assist the company in December 2009. Contributions included:

  • Contingency planning for a potential Chapter 11 proceeding including preparing the debtor-in-possession (DIP) budget, communication packages and assisting with the preparation of 1st day motions.
  • Working with other professionals and constituents to obtain a forbearance from the lenders to negotiate a restructuring.
  • Preparing weekly cash-flow projections for various in-court and out-of-court going concern and sale scenarios.
  • Preparing the company’s business plan and identifying potential strategies to improve the company’s economic model. This business plan was used as a basis for developing capital restructuring alternatives.
  • Negotiating and implementing the company’s selected out-of-court capital restructuring plan.

Outcome

Zolfo Cooper’s leadership and critical experience contributed to the accomplishment of an out-of-court solution in which half of the senior debt and all of the mezzanine debt was converted to equity. All of the trade vendors were unimpaired.

The original equity sponsor retained a small percentage of the equity and received warrants to participate in any potential upside over the coming years.

Zolfo Cooper’s assistance directly contributed to a consensus solution among the otherwise acrimonious constituents.