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K'NEX Brands Appoints Winter Harbor as Financial Advisor

As seen in Debtwire.

K'NEX Brands engaged Winter Harbor LLC as a financial advisor, said two sources close to the situation.

The mandate complements the retention of investment banker Lincoln International as the company looks to refinance existing debt. The Hatfield, Pennsylvania-based toy manufacturer has a USD 22.9m line of credit with PNC Bank, said one of the sources and a third source close to the situation.

K'NEX Brands manufactures a range of construction-oriented toys and also is under license from Hasbro to develop Lincoln Logs. Its two major customers are Wal-Mart and Amazon.

As reported, the company is trying to line up a USD 20m asset-based loan along with junior capital to replace the PNC line. The company had roughly USD 25m-USD 30m in accounts receivable and inventory, said two of the sources.

The company has generated annual sales in recent years around USD 30m-40m, but currently generates negative EBITDA. The company is forecasting a turnaround in 2018 in which EBITDA is projected to go positive, said one of the sources.

As reported, Cathay Capital Private Equity completed a recapitalization of K'NEX Brands in 2016 which resulted in the private equity firm, senior management and members of the company's two founding families taking a significant equity stake in K'NEX's holding company, Smart Brands International.

Winter Harbor has served as a financial advisor in other mid-market retailing and consumer oriented situations before including Picture People and Speed Commerce.