Focus Management Group

Retail Industry Experience

Online Retailer & Home Shopping Network

Industry:

Retail

Company:

Gems TV USA was a multimedia jewelry home shopping network and online retailer seen in 40 million TV homes. Gems TV USA filed for Chapter 11 bankruptcy protection four weeks after its ultimate parent company, Singapore Exchange Main Board–listed Gems TV Holdings Limited, announced that it was ceasing operations of Gems TV USA and taking an investment position in Multimedia Commerce Group, Inc., operator of direct competitor Jewelry Television.

Situation:

Since its inception in November 2006, the Company struggled to maintain a sufficient level of profitability to sustain its operations and service its debts. Its troubles were exacerbated in the year leading up to the Chapter 11 filing as nationwide economic conditions resulted in decreased discretionary spending by consumers. In addition, the Company’s margins were severely impacted by heightened gold prices, because attempts to fully pass the costs of raw materials increases to customers were unsuccessful. The Company voluntarily filed for Chapter 11 bankruptcy protection on April 5, 2010.

Focus Scope:

Focus was appointed as Financial Advisor to Gems TV USA under an order entered by the United States Bankruptcy Court for the District of Delaware.

Tasks Performed:

  • Analyzed potential liquidation scenarios and determined that continuing to sell jewelry through normal channels, even at discounted prices, provided a significantly better outcome that selling the remaining inventory at liquidation values
  • Prepared a comprehensive information memorandum to advertise the assets of the Company to obtain highest value during the 363 sale process
  • Secured a superior bid for television studio, warehouse equipment and other assets from a Stalking Horse bidder that intended to use the assets in place and assume the building lease
  • Prepared analyses of expected recoveries under various scenarios that served as the focal point for settlement discussions by and among the Debtor and several other constituents
  • Assisted the Debtor in all aspects of the Chapter 11 process and wind-down activity

Results:

  • Approximately 80% of the pre-closure inventory was sold at higher than cost on television and over the Internet.
  • Closed on the sale of non-inventory assets to the Stalking Horse bidder.
  • Global settlement agreement was successfully negotiated.
  • Due to the actions detailed above, the general unsecured creditors received a 100% recovery.
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