A popular toy company has now filed a Chapter 11 bankruptcy protection with debts between $50 and $100 million with assets in the same range.
This toy company is Basic Fun, which owns a massive portfolio that includes powerhouse brands such as Care Bears, Tonka, Lite Brite, K’nex, Lincoln Logs, Tinker Toys, Playhut, Uncle Milton, Fisher Price Classics, Mash’ems, and Littlest Pet Shop.
“All of us at Basic Fun! are dedicated to enriching lives and creating unforgettable moments through imaginative play,” the company shared on its website.
Basic Fun has an array of vast partnerships with big-name brands.
“The company is proud to have valued licensing partnerships to include Hasbro, Disney, Mattel, Nintendo, Netflix, Coca-Cola, Universal, Cloudco Entertainment, NFL, and NBA,” according to its About Us.
“Our iconic brands and broad product portfolio are sold by leading retailers and distributors in over 60 countries around the world. Basic Fun! has an omnichannel go-to-market strategy with a strong presence online, in-store, and in family entertainment venues,” the company added.
Basic Fun entered into a voluntary bankruptcy proceedings and hope to emerge from it rather quickly.
“Basic Fun seeks approval of $50 million in debtor-in-possession (DIP) financing from affiliates of Great Rock Capital, as well as a $15 million subordinate facility to be provided by RBC and the company’s founders, Jay Foreman and John MacDonald. The move comes following years of toy industry turmoil, and the company believes that the financing, once approved, will allow it to continue the normal operation of its business through restructuring proceedings,” Toybook reported.
During its bankruptcy filing, Basic Fun reported to have between 200 to 299 creditors, reports The Street.
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An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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