Restructuring, Potential Sale in Process at Hobarama

and Jeffrey Klineman

As a group of investment bankers attempt to firm up a deal to sell struggling Hobarama LLC, maker of the energy drink BAWLS Guarana, the company’s creditors have put a restructuring firm in place with a mandate to slash costs and prepare the company either for sale or for operation at drastically reduced staffing levels.

Michael Moecker & Associates, a Fort Lauderdale, Fla.-based company that specializes in the restructuring and liquidation of bankrupt companies, began working on a plan for BAWLS that involves cutting overhead while maintaining the company’s product delivery to retailers and distributors. That overhead may come from salaries, office space, and other expenses that can be eliminated during a bankruptcy-based restructuring.

“The staffing level is very flexible,” said Mike Lattas, the case manager at Michael Moecker & Associates, a Florida-based firm that specializes in handling bankrupt companies. “We are looking at every option we can to retain every employee and reposition the company for growth.”

Under pressure from creditors, which include lead noteholder Fifth Third Bancorp, the company’s founders, Hoby Buppert and Christina Staalstrom, were forced out in November. Since that time, Moecker & Associates has been retained to attempt to position BAWLS for a rapid transition. While BAWLS had been on the market for most of 2009, since the departure of Buppert & Staalstrom, the deal qualifications have opened up rapidly.

“We’ll consider any option,” said Mike Lattas, the case manager assigned to BAWLS by Moecker & Associates. “We are controlling costs as needed. We’re attempting to get Hobarama up and on its feet.”

While that takes place, a potential deal for the company that originated with members of the original team tasked with selling Hobarama is apparently following a parallel track.

“There is an exclusive letter of intent that has been signed,” said Kevin Coyne, a partner at Canal Mezzanine Partners, which has been involved in an attempt to sell the company since last year. According to Coyne, the potential buyers are a “committed investment group that’s working out the details on a new direction.” More information will be available in the coming weeks, Coyne added.

Meanwhile, calls to the BAWLS offices – and to every extension on the BAWLS switchboard – went unanswered this morning. A message on the company’s answering machine said that BAWLS was closed for the holidays, and would re-open on Dec. 28.

While the office might be closed, however, the supply chain does appear to be open to new distributors. In Cary, North Carolina, the manager of RUAGAMER – a store that sells computer games and accessories, long a core component of the BAWLS fan base – said he had just signed up to be the area’s chief distributor.

“I only signed up with them last week,” said RUAGAMER’s Jeff Torello. “There’s three pallets on the way.”

While Great State Beverage, a distributor in Northern New Hampshire, confirmed that it has recently terminated its contract with BAWLS, other independent DSD houses are apparently still carrying the brand.

“We just picked up some as normal over at their facility,” said Randy Shanker, the owner of Canada Dry of Lansing, Mich. Shanker explained that he was aware of the recent turnover at the top at Hobarama, and that sales of the product had been slow, but that he had nevertheless recently picked up two pallets.

“With the right situation, it could be successful,” Shanker said. “Their bottles are tremendous, it’s a unique product. With a little attention, it could perform.”