Merisel

Situation

Merisel was a $4 billion computer products distributor that experienced significant problems with its overleveraged capital structure. In order to avert a loss of trade support due to such leverage, Merisel reached an agreement with its public bondholders, in which such holders would convert into approximately 80% of the company’s pro forma equity.During the implementation phase of such transaction, Merisel’s fortunes improved (in part due to the stability provided by the agreement with the bondholders). Merisel took advantage of such improvements to strike a better deal with a private equity firm, while reneging on the agreement with the bondholders. Essentially, Merisel simply cancelled the equity deal with the bondholders and reinstated their bonds.

Engagement

Gordian Group was engaged by counsel to the bondholders. The case involved complex solvency, valuation and bankruptcy matters. A significant part of our assignment involved assessing the level of damages the bondholders suffered.

Outcome

Gordian Group was able to provide compelling testimony that demonstrated a significant value loss. In addition, Gordian Group was also asked to evaluate whether the original bondholder deal could ever have been consummated in the first place (no deal, no damages). This part of the case revolved around very arcane bankruptcy issues. Again, Gordian Group was able to provide compelling testimony. The case settled prior to trial with an attractive package for the bondholders.