Equitable Bag Co.Equitable Bag Co.

Equitable Bag Co., Inc.

Situation: Largest U.S. manufacturer of shopping bags filed 2nd Chapter 11; No leadership whatsoever – a 'rudderless ship' adrift.

Outcome: Resolved 2nd chapter 11 and emerged within 1-year; halted cash burn and achieved profitability setting company on sustainable course for future growth and dominance in the industry.

Role: The Belét Group appointed as DIP – CRO, CEO, COO, CFO – duration: 1 year

State of Affairs: Family-owned manufacturer of paper and plastic bags for the retail trade was hugely successful for over 5 decades; 3rd generation sold the business in a highly leveraged transaction that failed; the 1st attempt to restructure in Chapter 11 was unsuccessful (new management was brought in, but immediately exited); 2nd Chapter 11 was filed within 60-days; business was operating without leadership and burning cash profusely; customers (major retailers) were pulling Christmas orders and fleeing; assets were dissipating – business was in a free-fall.

Proximate Cause of Failure: Clear lack of leadership; complete loss of focus; years with total lack of investment in maintaining M&E; wrought with quality problems; severely undercapitalized; seriously overleveraged.


  1. Installed interim CRO, CEO, COO, CFO; assessed, streamlined & recruited new, seasoned senior management team.
    Result: Stabilized organization and provided leadership.
  2. Assessed core competencies and determined that the Company's true forte was in bag design and printing quality; that the business was actually an advertising and promotions company (shopping bags were essentially walking billboards for the retailer). At some point business concentration had shifted to cost containment and avoidance … The Company was being run as a commodity brown paper sack company (similar to grocery sacks).
    Result: Redirected company focus back to design, high-grade printing and high quality - the true industry business drivers.
  3. Launched a sweeping quality improvement campaign, which included serious repair of M&E and dramatic re-education (culture shift) of employees putting responsibility for quality directly on management and each line employee … 'driving-in quality!'
    Result: Out of control scrap, waste and variable costs radically dropped and design, printing and product quality markedly improved.
  4. Embarked on a campaign to meet with each major U.S. retailer to communicate & demonstrate a shift back to the key industry business drivers (design, high-grade printing and product quality) and outline the measures being taken to stabilize and restructure the business to assure customers that the turnaround was real and sustainable.
    Result: Won back most of the lost contracts, among them the May Co. and Federated, and stopped the precipitous business erosion threatening the life of the enterprise.
  5. Consolidated operations, moving the majority of the corporate headquarters to the principal manufacturing facility (1M sq. ft.) where the majority of the spending and activity was going on; streamlined business processes and the organization; improved process flow and inventory management; markedly strengthened management team skill-sets and instituted initiative-based problem-solving aligned with Company's business drivers.
    Result: Dramatically reduced overhead, improved communication, and achieved profitability and cash flow positive.
  6. Negotiated and implemented 1st ever labor contract gaining significant labor rate and work rule concessions in exchange for providing bonus-based incentives for performance improvement.
    Result: Measurably reduced labor costs and substantially improved cooperation, productivity and operating performance.
  7. Met with key suppliers and negotiated new, very favorable post-emergence supply pricing and payables terms predicated on consolidated buying and minimum purchase commitments; negotiated incentivized settlement terms on pre-petition debt based on granting specified levels of post-emergence trade credit.
    Result: Achieved support for Plan of Reorganization and set the stage for significantly reduced future supply costs.
  8. Survived and rebounded from a major plant disaster (force majeure – winter storm roof collapse) idling the primary manufacturing operation during critical operating period.
    Result: Leveraged disaster into improving production and quality capabilities and strengthen employee resolve to succeed.
  9. Negotiated $45M in exit financing to support working capital needs post-emergence.
  10. Grand Result: The 9 initiatives, above, led to a resolution of the 2nd Chapter 11 within 1-year; reversed $1.5M monthly losses and achieved positive cash flow; expanded market share (regaining major lost accounts) and paved the way for future growth; settled $25M in secured claims at 100¢; resolved unsecured claims at 50¢; converted $50M of secured notes to equity; and arranged a new $45M working capital line of credit.

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