Cornerstone Refinancing, but Not Divesting

Westchester, OH–If you heard rumors that Cornerstone Brands is planning to sell some of its titles, forget them. The catalogs are definitely not for sale, according to sources inside the company.

In fact, in May, Garnet Hill copresidents Brian Gowen and Diane Brush, and creative director Greg Covell approached parent company Cornerstone about buying the apparel and linens title, sources says, but the company refused to sell it. The executives subsequently resigned in June. Gowen and Brush were replaced on an interim basis by Frontgate founder John Osteen, who has been a Cornerstone executive since the company bought his title five years ago.

But the $485 million multititle mailer, whose titles include home furnishings books Ballard Designs, Frontgate, and Smith & Noble, travel accessories catalog TravelSmith, apparel book The Territory Ahead, and gifts catalog Whispering Pines, is working on a refinancing. Cornerstone, which received an initial venture capital investment of $60 million in September 1995 and another $25 million in venture capital last year, is switching from one bank syndicate to another, according to several sources within the company.

Some of Cornerstone’s primary cash problems stem from excess capacity in its 860,000 sq.-ft. distribution center, says executive chairman Bill End. Cornerstone had planned to acquire catalogs during the past two years. But instead, “we overspent on the Internet like most companies did,” End says. “We certainly made some mistakes, but we have built up a successful $100 million Internet business.”

Cornerstone plans to maximize the space by handling fulfillment for one or two outside companies, End says. The company also plans to get back into an acquisition mode next year.

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