Greenstein Bullish on Homestead's Future

Brent Felgner, Powell Slaughter, September 4, 2006

New York — David Greenstein is trying to decide what to do next.

In his office in a nearly empty former London Fog Group showroom on Seventh Avenue, Greenstein's eyes lit up as he pondered a series of possible “roll-up” deals that could place his Homestead textiles unit back in the catbird seat — perhaps at the core of a much larger operation. Or, in the more likely scenario, it could turn out to be a decidedly more modest reorganization with a debt-holder partner.

Greenstein, Homestead ceo, declined to publicly discuss what those deals might be; he said he was hopeful they might gel, but acknowledged the requisite parts would be difficult to cobble together. But his hopes are big — very big — and the adrenaline is almost visible when he discusses them.

And, he does have a fallback plan.

“I have assurances already from our previous sponsors that whatever happens — and we're so close to the finish line now, on debt — that we will restructure the company with their assistance,” Greenstein said in an interview late last week at his office. “Worst-case scenario is that it will take a little longer: 'keep going and try to build the business.' And that would normally be OK for anybody and OK for me, by the way. Because after this last experience, I'm not in for another big adventure.”

Homestead and Homestead Hospitality are all that remain of the old London Fog Group, which filed for bankruptcy protection last March; for London Fog it was its second such event in 5 years. The decision to sell off the assets came quickly.

The London Fog stores are being liquidated. Pacific Trail outerwear was sold to competitor Columbia Sportswear for $20.4 million in April. London Fog's two-day auction August 18 resulted in a deal with Iconix Brand Group that brought another $37.5 million in cash and stock. Iconix beat out an investment group led by Boston-based liquidators Gordon Brothers.

The $57.9 million from those two deals will pay down most of the company's secured debt; Greenstein said his efforts now are also directed at paying off as much of the unsecured debt as possible — which he characterized as an ethical matter.

Deal-making is clearly in Greenstein's nature; he tacitly agreed that his propensity to act, combined with his tenderfoot status in the outerwear business, conspired to help push the Group into Chapter 11. Greenstein indicated he is a wiser, albeit much sobered businessman now.

But that doesn't mean crawling into a corner. He said Homestead's “portable assets” — sourcing, designing, micro-branding, along with a continuing search for a national brand — are still being done and done well. That was Homestead's business model from its launch in 1997.

Homestead's portfolio even now includes such brands and designers as Angela Adams, Collier Campbell, Nancy Koltes, Dreams by Peacock Alley, Preston Bailey, Jeffrey Bilhuber, The Art of Home Ann Gish, Cubanitas, MaryJane Butters, and others.

Greenstein asserted that retailers need a company like Homestead even more now, since their own efforts at product development and sourcing have often come up short.

“Any good retail buyer that's sitting in his chair has got to want a 'white knight' to walk through the door giving them a total solution,” Greenstein insisted.

The only missing element for Homestead has been scale. That led to the misstep with London Fog. Wiser now, Greenstein believes there still is a partner that can bring heft to his grand plan. Homestead can go it alone, if it must, and grow organically at a rate he said could be 10% to 15% annually. But there's so much more that could happen.

“We're pushing like mad, developing like mad, showing a beautiful showroom, taking our micro-branding strategy to the next level, looking actively for a national brand to license, looking actively to continue with future projects in hospitality — there's no conflict there,” Greenstein insisted.

“The only reason I'm thinking about these other situations is that I've been put in this situation by natural selectivity where I'm in a very interesting little crossroads,” he added. “Not my crossroads, not Homestead's, the whole industry is at a crossroads ... I don't want to sit here, fearful of risk at a time opportunity knocks the loudest. So because we're a company in play and because we're a company with a management that proved their worth in restructuring, and branding — we know what we're doing. We just got hit with a few knockout punches, which we'll seek to avoid in the future with the selection of a good partner. There is opportunity here.”

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