NEW YORK NexCen Brands Inc., parent to various foodservice brands including Maggie Moo’s, Marble Slab and Great American Cookies, said Monday that it may not survive as a company should it not increase its liquidity and pay off $21 million in debt by October.
NexCen, which went on a foodservice buying spree in recent years, told investors that a liquidity issue not disclosed in its latest annual report raised “substantial doubt about the company’s ability to continue as a going concern.”
The company said it would explore all strategic alternatives for its business, including a possible sale of one or more of its portfolio companies or potential “capital market transactions.” NexCen also said it would continue discussions with its lender and take “immediate steps” to reduce operating expenses.
The liquidity crunch came to light as the company was preparing its first quarter financial results, it said, and centers on its latest acquisition, the $93.7 million purchase of Great American Cookie Co. in January. To fund the deal, NexCen amended its credit facility with BTMU Capital Corp. to allow for an extra $70 million. The amendment also included a stipulation that NexCen had to repay $30 million of that debt by Oct. 17. That agreement was never disclosed in regulatory filings, NexCen admitted.
In a recent review of all cash flows from its various businesses, NexCen discovered a “near-term operating cash shortfall” and now estimates that $21 million would be needed to make the necessary principle payment by October.
The company is “continuing to review all of the relevant facts and circumstances,” it said, and an independent counsel was hired to conduct a review of the situation. It hired a new chief financial officer in late March. NexCen added that all 2007 financial filings, its January filings surrounding its credit facility, and its previous guidance related to this year should no longer be relied upon. However, it added that it did not expect any financial results to be changed.
The company’s shares plummeted 77 percent during trading on Monday to close at an all-time low of 58 cents per share. The stock had traded between $2.49 per share and $13.18 per share for the past 52 weeks. NexCen, based in New York, is an acquisition-focused company that typically purchases distressed retail brands. Its foodservice holdings include Maggie Moo's, Marble Slab Creamery, Pretzelmaker, Pretzel Time and Great American Cookies. Its full portfolio also includes The Athlete’s Foot and Bill Blass retail brands.
NexCen was created in June 2006 by well-known dealmaker Bob D’Loren when he merged the newly created acquisition vehicle into his investment bank, UCC Capital Corp. It then went on a buying spree in the consumer sector and now boasts 1,900 locations across its various brands and tallies $1.3 billion in retail sales.
The company said it expects to report first quarter revenue of $13.9 million, up from $3.9 million a year ago. The surge reflected the number of acquisitions in late 2007 and earlier this year. Full financial results and revised 2007 statements will be filed as soon as possible, the company said.
“Until recently our efforts were focused primarily on finding good acquisitions and integrating those operations,” D’Loren said in a conference call with investors. “The next logical step is to find ways to improve productivity eliminate unnecessary expenses and find innovative ways to accomplish more with less.”