Colorado Group gets back on its feet

Formerly backed by Affinity Equity Partners until it was taken into receivership in May, Colorado Group is to emerge from administrator Ferrier Hodgson under the name Fusion Retail Brands. The restructured company will open with A$40 million allocated toward capital expenditures and more than A$30 million for marketing over the next four years. Colorado was formerly weighed with A$430 million in debt, but creditors - which include include Nomura, Anchorage Capital Partners, NAB and Ice Canyon - have largely cleared this burden by converting all but A$90 million into equity.

"We have seen this business go from the brink of collapse to emerge from receivership financially stable, with a secure balance sheet and a bright future," Kevin Roberts, former CEO of Colorado Group and current CEO of Fusion Retail, said in the release. "Our debt has been reduced by 75% and now we can get on with the business of growing these brands and making sure they reach their full potential."

The conditions of Colorado Group's revival make it something of a private equity test case. Gary Stead, co-founder and managing director at Shearwater Capital, describes the company as a classic example of a "loan to own." Investors buy up distressed companies' debt on the secondary market and negotiate with the boards to secure what are in effect controlling positions. To some in the industry, this represents a special situations opportunity that is destined to become more significant.

Colorado Group is by no means the only retail brand hoping to find salvation after going to the wall. Others include Allied Brands, which was dropped by Baskin Robbins late last year, Melbourne designer jeans label Bettina Liano, and REDGroup Retail - a name that resonates with the private equity industry given its dramatic fall from star to write-off in Pacific Equity Partners' (PEP) portfolio.

REDGroup, which owned bookstore chains Borders and Angus & Robertson, went to Ferrier Hodgson in February. Three months later, the administrator said it was "urgently seeking" potential buyers and offers for individual stores would be considered. Collins Booksellers came in for several Angus & Robertson franchises, but the fate of the others is unknown.

These facelifts do come at a cost. According to news site Perth Now, more than 100 jobs were lost after more than 20 Colorado Group stores shuttered in Western Australia. Stuff.co.nz reported nine Colorado stores in Auckland, Christchurch, Lower Hutt, Palmerston North and Nelson were closed in June, laying off 61 staff and more than 1,000 nationwide. Fusion Retail Brands said it does not look to boost its presence in New Zealand following these cuts.

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• Topics
• Australasia
• Credit/Special Situations
• Consumer
• Australia
• Consumer
• Distress
• Affinity Equity Partners
• REDGroup
• Pacific Equity Partners