Dimac Files for Chapter 11 Bankruptcy Protection
The filing was made in Wilmington, DE.
Dimac, which offers creative strategy/agency, database strategy/management and production services, said it will conduct business as usual and continue to provide service to its clients while it develops a more appropriate capital structure.
Robert "Kam" Kamerschen, chairman and CEO, said, "We filed for reorganization because our current capital structure simply is not consistent with the strategic direction we are implementing for Dimac. While our business is fundamentally sound, we have too much debt on our balance sheet."
He said that "all our business units are open, serving clients and conducting business as usual, and they will continue to do so. "
Kamerschen said one of the reasons for the filing is that Dimac had poor financial performance in fiscal 1999 -- largely due to the loss of a few key accounts by two of the company's nine business units. As a result, he said it was not possible to meet the principal and interest payments on that debt and continue to fund Dimac's ongoing growth strategy.
"We are therefore taking advantage of the breathing room afforded us through the courts to eliminate the excess debt on our balance sheet," he said.
Dimac also announced that it obtained a $20 million debtor-in-possession financing commitment from its existing lenders, led by Credit Suisse First Boston. Upon court approval, these funds will be available to the company to help meet its future needs and fulfill obligations associated with operating its business, including the prompt payment to vendors for all goods and services that are provided after the filing.
Pending that approval, Dimac has received court approval for $5 million of interim financing. Employees will continue to be paid in the normal manner, and their health benefits will not be disrupted. The company does not envision there will be any staff reductions as a result of this action.
"There is clear evidence that our turnaround is taking place. In fact, all our business units are, once again, performing on plan or better, and our entire business is tracking to plan," said Kamerschen.
"We are implementing an aggressive turnaround campaign that includes solidifying top-level leadership and improving our financial position and performance. Over the last several months, we have brought on board a number of committed and seasoned business leaders to strengthen our executive team. All these senior executives are committed to Dimac and its reorganization and will remain with the company."