CPP Investments Enters Global Restructuring Business

Benefits Canada reports that CPP Investments is financing Gordon Brothers, a global restructuring, investment advisor:

The Canada Pension Plan Investment Board is providing $300 million in credit to a global restructuring and investment advisory firm.

The financing of Gordon Brothers, a Boston company that provides capital to businesses, will be delivered through the CPPIB’s subsidiary, CPPIB Credit Investments Inc. The funds will be used to fund capital investment offerings. In 2021, these offerings generated more than $700 million for the company. 

“This new relationship with Gordon Brothers broadens our access to the asset-based lending space as we continue to build a diversified portfolio of credit assets,” said Andrew Edgell, the CPPIB’s global head of credit investments, in a press release.

CPP Investments issued this press release last week on this deal:

Gordon Brothers, the global advisory, restructuring and investment firm, has received $300 million in financing from Canada Pension Plan Investment Board (CPP Investments) through its subsidiary CPPIB Credit Investments Inc., increasing the firm’s capital base to over $1 billion.

This financing will fuel the continued rapid growth of the firm’s capital offerings, which generated over $700 million in originations worldwide in 2021, building on billions of assets traded and financed in recent years.

“This new investment marks an important milestone in Gordon Brothers’ evolution and builds on our partnership with Stone Point Capital,” said Ken Frieze, CEO of Gordon Brothers. “We look forward to welcoming CPP Investments as we accelerate the growth of our lending, sale leasebacks and investments globally.”

“We are impressed by how the Gordon Brothers’ global platform uniquely leverages deep appraisal and disposition expertise combined with disciplined underwriting to support businesses undergoing transformation,” said Andrew Edgell, Global Head of Credit Investments, CPP Investments. “This new relationship with Gordon Brothers broadens our access to the asset-based lending space as we continue to build a diversified portfolio of credit assets.”

Gordon Brothers provides both short- and long-term capital to clients undergoing transformation. The firm lends against and invests in brands, real estate, inventory, receivables, machinery, equipment and other assets, both together and individually, to provide clients liquidity solutions beyond its market-leading disposition and appraisal services.

Gordon Brothers partners with management teams, private equity sponsors, strategic buyers and asset-based lenders globally to provide our expertise and additional capital in special situations. The firm’s tailor-made solutions provide clients additional capital alongside traditional debt and equity, and its structures complement senior asset-based lending facilities and include credit and yield enhancements.

About Gordon Brothers

Since 1903, Gordon Brothers (www.gordonbrothers.com) has helped lenders, management teams, advisors and investors move forward through change. The firm brings a powerful combination of expertise and capital to clients, developing customized solutions on an integrated or standalone basis across four services areas: valuations, dispositions, financing and investment. Whether to fuel growth or facilitate strategic consolidation, Gordon Brothers partners with companies in the retail, commercial and industrial sectors to provide maximum liquidity, put assets to their highest and best use and mitigate liabilities. The firm conducts more than $70 billion worth of dispositions and appraisals annually and provides both short- and long-term capital to clients undergoing transformation. Gordon Brothers lends against and invest in brands, real estate, inventory, receivables, machinery, equipment and other assets, both together and individually, to provide clients liquidity solutions beyond its market-leading disposition and appraisal services. The firm is headquartered in Boston, with over 30 offices across five continents.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2021, the Fund totaled C$550.4 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook, or Twitter.

So, who is Gordon Brothers and what does this company do? CBI Insights provides a snapshot:

Gordon Brothers is a global advisory, restructuring and investment firm specializing in the industrial, consumer products and retail sectors. Gordon Brothers delivers valuation, disposition, operational and investment services worldwide on a multi-asset basis. The company was founded in 1903 and is based in Boston, Massachusetts.

Also, the press release above states this:

Gordon Brothers provides both short- and long-term capital to clients undergoing transformation. The firm lends against and invests in brands, real estate, inventory, receivables, machinery, equipment and other assets, both together and individually, to provide clients liquidity solutions beyond its market-leading disposition and appraisal services.

Gordon Brothers partners with management teams, private equity sponsors, strategic buyers and asset-based lenders globally to provide our expertise and additional capital in special situations. The firm’s tailor-made solutions provide clients additional capital alongside traditional debt and equity, and its structures complement senior asset-based lending facilities and include credit and yield enhancements.

And later on about the company:

Whether to fuel growth or facilitate strategic consolidation, Gordon Brothers partners with companies in the retail, commercial and industrial sectors to provide maximum liquidity, put assets to their highest and best use and mitigate liabilities. The firm conducts more than $70 billion worth of dispositions and appraisals annually and provides both short- and long-term capital to clients undergoing transformation. Gordon Brothers lends against and invest in brands, real estate, inventory, receivables, machinery, equipment and other assets, both together and individually, to provide clients liquidity solutions beyond its market-leading disposition and appraisal services. The firm is headquartered in Boston, with over 30 offices across five continents.

If you go on its website, you can read more about this company:

I particularly like reading all the case studies on deals it was involved in, like these ones:

For example, Gordon Brothers is the owner of British heritage brand Laura Ashley. 

This is a case study worth reading given this iconic brand:

In April 2020, Gordon Brothers acquired the global Laura Ashley® brand, archives and related intellectual property from its U.K. administrators, PwC.

Our multifaceted role in this transformation—acquiring the brand, affording the opportunity for a going concern with a contingent alternative, closing the stores and disposing of all retail merchandise—speaks to our ability to execute a variety of transactions.

Gordon Brothers provided Laura Ashley’s Administrators with the highest value for the stock while preserving the brand’s value and image. The conversion of an inefficient vertically integrated business to a flexible and scalable licensing business secured the long-term commitment from all key existing licensees and franchisees and further portfolio expansion. It bolstered the brand’s e-commerce presence and supported the development of strategic sourcing and wholesale and retail relationships.

Retail Disposition

Gordon Brothers’ previous experience allowed for the seamless undertaking of Laura Ashley 153 store closures in the U.K. and Ireland, even amid challenges presented by the COVID-19 pandemic.

Sales began as soon as retail stores could reopen in the U.K. and Ireland following pandemic-related shutdowns. Online trading through Laura Ashley’s e-commerce platform was an important sales component, especially while stores remained closed. Website promotional sales started a month before stores reopened to boost sales and ensure awareness of Laura Ashley’s transformation while protecting the brand’s image. Online sales were strong with solid results out of the home and fashion areas.

We assumed full financial risk of the retail stock disposition by providing the Administrators with a guaranteed baseline result during unprecedented uncertainty. The store dispositions included the sale of all store furniture, fixtures and equipment that provided a turnkey solution and empty stores were returned to landlords without further cleanup expenses. Additionally, Gordon Brothers sold some inventory to licensees and franchisees ensuring continuity among remaining sales channels as the brand prepared for relaunch.

The store closures were completed in August 2020 and disposed of 120 million pounds of retail inventory, excluding franchises. Laura Ashley’s creditors benefited from the financial success since an upside sharing agreement was included as part of the guaranteed result.

Brand Acquisition

The purchase of Laura Ashley’s global intellectual property included trademarks, logos, designs, archives and customer lists. We based our investment decision on the global consumer awareness of Laura Ashley and customer affinity for the brand. Converting the business into an asset-light licensing operation was a key component of our plan given the longstanding network of licensees. Additionally, Gordon Brothers completed a key retail partnership in October with NEXT plc in the U.K. that will include a 3,000 square foot shop-in-shop in London, dozens of concessions and the relaunch of lauraashley.com in spring 2021.

I  recently read that Laura Ashley is returning to Australia and planning an expansion:

Laura Ashley is returning to Australia after it filed voluntary administration in March 2020, citing the pandemic as its core reason. It will expand into various countries as part of a multi-year partnership with IMG.

Gordon Brothers, a global advisory and investment firm acquired Laura Ashley, including its intellectual property, such as logos, customer assets, trademarks etc. “We based our investment decision on the global consumer awareness of Laura Ashley and customer affinity for the brand,” the business said.

Now the retailer is expanding back into Australia. Gordon Brothers are partnering with IMG in a multi-year partnership to expand into local waters, as well as New Zealand, China, the Middle East and India. This includes the expansion of Laura Ashley’s footwear, clothing, homewares, and hospitality offerings – which include retail and licensing collaborations and partnerships.

“We are delighted to partner with IMG to continue to expand Laura Ashley following the success of its spring homeware collection and fall fashion collaboration last year,” said Tobias Nanda, President of Brands at Gordon Brothers. “Our focus in working with IMG will be to select additional strategic partnerships and collaborations to help bring the brand’s distinct aesthetic to consumers globally while continuing to develop our current brand partnerships.”

In 2020, the British retailer announced it was seeking a $30 million ’emergency’ loan, but subsequently collapsed. “The Covid-19 outbreak has had an immediate and significant impact on trading, and ongoing developments indicate that this will be a sustained national situation,” explained a spokesperson for the brand in 2020.

The firm converted the business into an asset-light operation, which included a full-scale redevelopment of its online platform.  The business then spent the months of 2020 and 2021 operating with digital front of mind as the pandemic forced stores to shut in the UK and Ireland. According to Gordon Brothers, online sales were ‘strong’ with ‘solid results’ out of the home and fashion areas.

“For almost 70 years, Laura Ashley’s iconic, quality-led designs, prints and patterns have continued to inspire the most coveted styles and fashion trends around the world,” explained Tim Smith, the VP at IMG. “We are eager to leverage this rich heritage and the Laura Ashley archive, comprising more than 98,000 pieces of unique artwork, textiles and footage, to develop relevant new fashion and lifestyle products for existing and new fans of the brand.”

Gordon Brothers basically "reincarnated" Laura Ashley after it collapsed during the pandemic, converting its retail business into an asset-light operation, which included a full-scale redevelopment of its online platform. 

Another case study I enjoyed reading was how Gordon Brothers helped convert a medical building in Burlingame, California to a life sciences building:

In June 2021, Gordon Brothers acquired 1828 El Camino Real, a 64,835-square-foot building on 0.87 acres in Burlingame, California, as a value-add conversion to a life sciences building with our joint venture partner Sansome Street Advisors (SSA), a San Francisco based commercial real estate firm.

SSA was looking for a partner who was interested in the life science conversion business plan and who could recapitalize the project quickly. The firm reached out to the Gordon Brothers’ Real Estate team for our ability to invest our own capital, streamline the underwriting and approval process, and close quickly.

The property is a multi-tenant, eight-story building that was 44% leased to life science tenants, 35% leased to medical office tenants and 21% vacant. Immediately after purchasing the building, our team and SSA began the conversion of the medical offices to life science spaces and marketing the available space. We anticipate completing the conversion of the remaining suites to life science tenancies within a two- to three-year holding period.

The property was of great interest to Gordon Brothers as the San Francisco Bay Area life science market is home to over 250 life science firms. The peninsula alone comprises 53% of the total life science market in the Bay Area.

Our operating partners benefit from Gordon Brothers’ reputation as a knowledgeable and actionable investor. Our firm specializes in structuring complex, multi-asset transactions in the retail, commercial and industrial sectors. We partner with operating companies and their investors to help overcome operational challenges during transformation.

Gordon Brothers invests in compelling value-add opportunities including distressed, transitional and excess corporate real estate. Our firm offers various equity strategies including asset acquisitions, joint venture equity investments and sale leasebacks. We purchase existing notes and offer various debt strategies to owners including senior loans, bridge loans and mezzanine financing.

In addition to our real estate investment platform we offer a variety of real estate services such as portfolio reviews, sale of real estate and lease restructuring, including terminations, renewals, site selection and inhouse real estate department augmentation.

This too is a great deal where they helped restructure an asset to get maximum value out of it.

As stated above: "...the San Francisco Bay Area life science market is home to over 250 life science firms. The peninsula alone comprises 53% of the total life science market in the Bay Area."

Life sciences is a hot area in institutional real estate, one that Canada's large pensions know all too well.

I would encourage my readers to read as many cases studies as possible on Gordon Brothers' website here to really appreciate the breadth and depth of their restructuring capabilities.

Now, why is CPP Investments helping Gordon Brothers expand its global operations?

Look where we are in the economic cycle. Credit markets, stock markets and leading indicators are all pointing to a major slowdown ahead.

In this environment, you want to provide a global restructuring and advisory firm financing to capitalize on opportunities as they arise.

And there will be plenty of opportunities to restructure companies over the next two years. 

Andrew Edgell, Global Head of Credit Investments at CPP Investments notes: “This new relationship with Gordon Brothers broadens our access to the asset-based lending space as we continue to build a diversified portfolio of credit assets.”

I interviewed Andrew back in February and he's a really smart guy who understands the full spectrum of credit investments, from high yield bonds, to direct lending, to complex structured credit. 

This new relationship with Gordon Brothers will be mutually beneficial and I foresee more follow-on financing from CPP Investments in the years ahead. 

Below, how do you revive a great retail heritage brand like Laura Ashley? Nick Taylor, Senior Managing Director, International Retail, joins Tobias Nanda, President, Brands to take you through how we bought Laura Ashley’s brand, intellectual property and archives and turned the brand around using our assetless based retail model. Great insights here from experts who really understand restructuring.