MEC considered an appeal to members for a bailout before it agreed to a private equity deal
Article content continued
It looked at applying for the federal government’s Large Employer Emergency Financing Facility, which provides emergency funding during COVID-19, and the Business Development Bank of Canada’s mid-market financing program, which also offers relief from the pandemic downturn.
“But MEC either did not meet the conditions of such programs or the costs of such programs were prohibitive,” the documents read.
In the end, after exhausting all alternatives, the committee searched for a buyer and selected Los Angeles-based Kingswood Capital Management — a relatively small player in the American private equity scene with four prior acquisitions to its name.
Its founder, Alexander Wolf, and his handpick to lead MEC after the acquisition, Eric Claus, reached out to frustrated members this week in an open letter: “We hear you. We understand…. All we ask is that you hear us out and give us a chance to earn your trust.”
Their turnaround plan focuses on stores, products and e-commerce. They teased a loyalty program, and priority access to events and rentals in an effort to “treat our customers like the co-op members [they] have been.”
Save MEC rejected the gesture. “Kingswood misses the point entirely — members aren’t upset about points or programs, it’s that they’re trying to take our co-op from us,” said Kevin Harding, a spokesperson for the group, in a statement.
Meanwhile, MEC wants the sale process to move quickly.
Approval “is a matter of urgency,” said Wallis in his affidavit, adding that an extension or delay in approval or closing “may have serious and detrimental consequences.” He pointed to MEC’s ongoing weekly operating losses and the importance that any buyer can close “in sufficient time to take advantage of the coming holiday sales period.” The retailer is losing about $1.6 million a week in net cash-flow losses, and projects it will lose more than $15 million next month and $17.4 million over the next 11 weeks, according to court documents.
