PartnerCo aka Partner.co – MLM Scam Rebranded
NewAge Inc., a direct-to-consumer seller of health and wellness products, filed for bankruptcy after exposing substantial faults in its financial reporting and announced plans to sell itself. PartnerCo is the new name under which NewAge has emerged from bankruptcy.
PartnerCo revealed its new “identity” on February 13, while arrangements for the rebranding appear to have been made in January.
Even though its balance sheet shows assets exceeding obligations, PartnerCo, As a result, is currently dealing with a severe liquidity crunch.
PartnerCo Because Bankruptcy Wiped Away NewAge
In March, NewAge updated its disclosures on selling CBD-infused beverages, claiming that some sales were made without company consent and that a former chief executive was aware that the beverages were marketed through its direct store distribution business.
The Corporation has determined that pursuing a strategic transaction and safeguarding and preserving value for all stakeholders may be accomplished most quickly through the Chapter 11 procedure. Subject to court approval, the Company has obtained a commitment for a $16.0 million “debtor in possession” financing facility with the help of its advisors. These funds and earnings from current operations will give the Company the liquidity it needs to proceed through the sale process.
Also, the Company is submitting a motion to the court asking permission to enter into an asset acquisition agreement with DIP Finance, LLC, a “stalking horse” bidder. The Company plans to explore selling nearly all of its assets in one or more transactions as a going concern. Court approval and any better or higher bids received as part of the Company’s ongoing auction procedure are both conditions precedent to this transaction.
NewAge got a notice of default from lender East West Bank earlier this month due to the Company’s repeated failure to submit regulatory files on time. (Author’s emphasis.)
Additional Details on Bankrupt NewAge & PartnerCo
On August 8, 2022, NewAge received a letter from East West Bank containing notice of alleged events of default under the Loan and Security Agreement between the Company as the borrower and East West Bank as the lender (“Lender”) dated as of March 11, 2022 (“Loan Agreement”).
The Company is in default of its obligations under the Loan Agreement, according to the Notice of Default Letter, as a result of the Company’s failure to use commercially reasonable efforts to obtain the Lessor’s Acknowledgment and Subordinations and Bailee Waivers as required by Section 3.3(d)(i) of the Loan Agreement, and Company’s failure to deliver company-prepared financials for the measuring period ending March 31, 2022, as required by Section 6.2.
The lender declared all of the Company’s obligations under the Loan Agreement to be immediately due and payable in the Notice of Default Letter. There is currently $12.0 million or thereabouts owed by the Business under the Loan Agreement.
To pay off the remaining loan balance of $10.6 million under its 8.0% senior secured note with JGB Management, the Company entered into the fully cash-collateralized revolving credit facility (the “RCF”) in March.
PartnerCo Enters Into DIP Financing Agreement Amid Cash Flow Problems
PartnerCo, formerly NewAge, recently filed for bankruptcy, and even though its balance sheet shows assets surpassing liabilities, the Business is currently experiencing a severe liquidity shortage. The Company’s intangible assets and goodwill reached approximately $200 million by the end of Q3/2021, despite its $310.9 million in assets and $149.4 million in liabilities. Nevertheless, the Business has likely run out of money, given the average cash outflow of $8.5 million per quarter and obligations to creditors.
Before trading was stopped, the Company’s stock price increased by nearly 70%, and investors may feel upbeat because of the significant worth of the Company’s assets. But in actuality, the Business has already signed agreements to transfer its assets to a firm called “DIP Financing LLC” for $28 million and a $16 million super-priority DIP finance deal.
Although the firm intends to conduct an auction procedure to invite competitive offers on its assets, ordinary equity holders are unlikely to recoup anything unless both secured and unsecured creditors are fully satisfied, which would necessitate the emergence of much higher bids. Given the Company’s continued cash flow issues brought on by the absence of a sustainable business strategy, it seems unlikely that this will occur. As a result, the Business is now known as PartnerCo, although its financial problems remain.
The bankruptcy filing and subsequent asset sale process of PartnerCo (formerly NewAge) do not bode well for joint equity holders, who are unlikely to recover. Despite the initial momentum in the shares, the lack of a viable business model and ongoing cash burn suggests that any potential higher bid in the upcoming auction is improbable. Investors should consider using any significant share rally to exit their positions.