HALO Repays Suppliers For Newton Bankruptcy

Top 40 distributor HALO Branded Solutions (asi/356000) announced it has voluntarily paid $454,344 to suppliers who were unsecured trade creditors from the bankruptcy of Newton Manufacturing Company. The payment was part of HALO’s Newton Supplier Recovery Program, which was initiated by HALO when it purchased certain assets of the former Top 40 distributor last year.

In the program, HALO volunteered to pay creditors a portion of the revenue it retained from Newton. The amount is equal to 10% of any revenue in excess of $12 million that HALO derived in the first 12 months (starting June 30, 2015) from Newton account executives who joined the company. During the first year, HALO retained over $16.5 million in Newton business, and paid 10% of the excess over $12 million ($4,543,440).

“When we purchased the Newton assets, we made a commitment to the trade suppliers and decorators that we would work with them and for them to recover as much as we could from the Newton business,” HALO CEO Marc Simon said in a press release. “The goal of the Newton Supplier Recovery Program was to align the interests of Newton suppliers and account executives with HALO’s goal of successfully nesting Newton account executives. The account executives we have added from Newton have been a great addition to the HALO team, and their success with HALO is translating directly into recovered debt for our valued suppliers.”

The program will pay more than 500 industry suppliers 14.9 cents on the dollar on Newton unsecured trade debt. “While 14.9 cents on the dollar might not seem like a lot to any one supplier or decorator, I hope the industry recognizes that $454,344 – our first-year payment – represents a very significant investment in our relationships with all industry suppliers and decorators,” Simon said. “We are actively and demonstratively investing in these important supplier relationships for the long-term, protecting our existing account executives and reinforcing to our suppliers that HALO is the best option they can recommend to many of their distributor customers, whether or not they may be experiencing financial challenges.”

Joe Fleming, president of Top 40 supplier Hub Pen Company (asi/61966), says that Simon issued a monthly revenue report to the trade creditors, keeping everyone up-to-date. “He has done something that no one else has done,” Fleming told Counselor. “The program is good not only for Newton and HALO, but for the industry in general.”

HALO said there is a possibility of additional repayment for any Newton revenue over $15 million in a second 12-month period starting June 30 this year. At the outset of the program, HALO had capped the two-year total at $1 million, which means it could potentially pay creditors up to $545,656.

In a letter sent to suppliers and decorators last year, Simon stated that the unsecured creditors suffered “at least 70% and possibly closer to 100%” in significant losses. “Of Newton’s almost $10 million in indebtedness, as much as $4 million or more appears to be owing to its trade creditors,” Simon said. In the letter, he referenced the $12 million benchmark as what HALO would need to make the Newton acquisition profitable.

“HALO’s commitment to voluntarily repaying a portion of Newton’s debt demonstrates how important their supplier relationships are to them,” said Rob Babb, vice president of sales at Top 40 supplier BIC Graphic (asi/40480). “We applaud them for it and appreciate their goodwill.”

Norm Hullinger, CEO of Top 40 supplier alphabroder (asi/34063), said that HALO has gone above and beyond in ensuring that former Newton suppliers recover as much as possible. “We are pleasantly surprised by HALO’s actions and are appreciative of the extremely professional manner in which they’ve approached this matter,” Hullinger told Counselor.

HALO’s Newton Supplier Recovery Program payment is independent of the Newton Manufacturing Company’s Chapter 11 Bankruptcy estate and any amounts that may be paid to unsecured creditors from the aftermath of Newton’s bankruptcy by its liquidating trustee.