4L Technologies (which operates as Clover Technologies, the parent company of industry remanufacturer Clover Imaging Group), has hired advisors to evaluate strategic options after losing a pair of key customers while struggling with nearly $700 million of debt, according to Bloomberg.
The company has hired the law firm of Kirkland & Ellis LLP and investment banking specialist Jefferies LLC to mull its balance sheet alternatives and strategic options, Bloomberg reported, citing unnamed sources. A July 9 preliminary earnings report reduced guidance and invited lenders to hire their own advisors.
The earnings update caused price quotes on its first-lien loan—about $693 million outstanding—to drop from 97 cents to 75 cents on the dollar. The loan, due in 2020, was issued to fund a $178 million dividend to shareholders in 2014, as well as refinance existing debt and pay expenses related to the transaction.
Business Challenges
Business-wise, Clover Technologies is feeling the pinch on two fronts. One of its largest clients on the refurbished smart phone side, AT&T, has opted to source previously used units from the OEM, according to the Wall Street Journal. Meanwhile, in the imaging space, HP’s dealer program has cut deep into Clover Imaging Group. HP’s growing partnership with Xerox—a significant buyer of Clover’s remanufactured HP goods—could significantly impact the remanufacturer.
In a letter to customers, CIG CEO George Milton and President Eric Martin wrote that they remain excited about their platform and market leadership position, and will continue to operate business as usual. They pointed out CIG’s 99.6% success rate with color and monochrome cartridges and third-party testing validation.
During the last 10 years, they wrote, Clover Imaging has built the “most robust services offering in the industry—far beyond simply remanufacturing cartridges. We now provide the value-added, partner-growth services that customers need to enhance profitability and gain market share, including managed print services, marketing services, nationwide service and support, help desk and training services, hardware and service bundles, and more.”
The letter added that CIG will continue to solicit feedback and evaluate opportunities to add more value for customers.
“Quite simply, we are charging full speed ahead, as we have a healthy sales pipeline and continue to make key strategic investments to capture long-term growth opportunities. Ultimately, we have the infrastructure, resources, and plan in place to achieve both our short- and long-term revenue goals. And most importantly, we remain committed to providing reliable, quality products and services to you at the best possible price.”
Representatives from Clover Imaging Group did not immediately respond to requests for comment.
4L Technologies cut the range of its annual earnings to $87 million and $96 million, according to Bloomberg, down from $135 million to $145 million in March. It has $136 million in cash on hand. Moody’s Investors Service downgraded 4L Technologies’ ratings, and revised its outlook from stable to negative.
