Oriental Trading Exits Chapter 11

Feb 15, 2011 1:44 AM  By

It was a happy Valentine’s Day for Oriental Trading Co.: The party supplies and novelties seller announced today it has come out of bankruptcy. It had filed for Chapter 11 on Aug. 25 under the name OTC Holdings and on behalf of Oriental Trading, OTC Investors Corp., Fun Express and Oriental Trading Marketing.

The 79-year-old merchant, which throughout the restructuring maintained double-digit operating margins, has reduced its debt by nearly 70%, says CEO Sam Taylor.

And Oriental Trading, which had been owned by private equity firm The Carlyle Group, while Brentwood Associates held a minority ownership stake, has new owners. About 15 financial institutions comprise OTC’s new ownership, Taylor says, with no one retaining a majority stake.

How did Oriental Trading come to have so much debt? The “go-go” years from 2005 to 2007 allowed some companies to add too much debt in financing acquisitions, says Stuart Rose, managing director with investment bank Tully & Holland.

“The bankruptcy puts the debt to equity ratio back in line,” Rose says. “While it doesn’t correct the fundamentals of sales and profits, it gives companies fighting and realistic chances for long-term growth.”

Now that about 70% of Oriental Trading’s debt is gone, “we feel very optimistic,” Taylor says. “We’re excited about the new ownership, who got to know more about the business than ever before through the restructuring process.”

Taylor says continued investment in Oriental Trading now positions the company for growth in that it can continue to “expand and refresh our product assortment. Last year, we introduced more than 6,000 new products,” he notes. “This year, that number will be even higher.”

What’s more, the company has invested in a state-of-the-art marketing database, “which will really help us going forward with email targeting, website content, and our numerous catalog titles,” Taylor says. “It not only captures historical transactional data, but also behavioral data.”