HOW RED IS MY VALLEY?
Valley is now said to be two to five days from filing for Chapter 11 bankruptcy protection. Most in the industry lay the blame squarely on the shoulders of Valley CEO Peter Berger. Although reportedly well-intentioned, his early insistence that the merger be a 50/50 equal-partner entity (it later became an 80/20 split) was a pipe dream.
Then there are reports of Valley projected monthly revenues through the fourth quarter being inflated by anywhere from 30% to 50%, ultimately souring Alliance lender GE Capital on the deal. Sources tell us he wasted precious time that saw Valley’s value diminish by the day. As one insider put it: "Talks were started in earnest in June. The deal should have been completed by September. Those 75 lost days were huge."
Although we are told that Valley employees have only been guaranteed their jobs through Dec. 15, most expect Valley’s senior lender Congress Financial to pony up some DIP (Debtor In Possession) financing to keep them afloat for the moment. If Congress can take Valley through a reorganization and sell it as an entity, they will see more of a return on the some $100 million they are owed, rather than taking it through a less-profitable liquidation.
Valley has reportedly whittled its massive debt to suppliers down to some $120 million, from a high of $148 million, through aggressive returns. The labels were willing to take a 50%-60% haircut in order to make the deal happen. They’ll now be lucky to see 25 cents on the dollar. Although Alliance will probably try and "sponsor" the restructuring, almost everyone we have contacted, including distribution toppers and competing one-stop operators, believe AEC CEO Eric Weisman was acting in good faith and wanted this deal to happen out of the courts.
Sources confirm Alliance expects to have a West Coast facility in place by mid-2002, with or without participation from a restructured Valley. It’s a dark day indeed for the once-mighty Woodland wholesaler. And it’s a sad day for all of the good people that work there.
