Financial Advisor to Ch. 11 Trustee of Mobile Phone Retailer

The Situation

A mobile phone retailer with thousands of employees and nearly 700 kiosks nationwide struggled with post-pandemic supply chain challenges. It carried significant payroll, rent, and other overhead expenses and was not profitable. When it failed to receive key mobile phone inventory for the 2022 holiday season, management ended its contracts with Costco and military bases, terminated more than 1,800 employees, and the company became insolvent.

How We Advised

Our experts were appointed Receiver to provide financial and operational support during the liquidation and wind-down of the business. The company entered Ch. 11 bankruptcy two months later. We recovered over $62MM as Receiver and then Financial Advisor to the Ch. 11 Trustee through the following key actions:

Collected over $30MM in outstanding A/R after our forensic accounting investigation uncovered disputed A/R and credits from large customers (Verizon, AT&T, T-Mobile) and critical vendors
Leveraged key employees to reclaim $18MM in inventory scattered across 550+ Costco stores and military bases
Determined management’s delay in initiating a wind-down process before the receivership resulted in substantial financial harm to creditors, then supported the Bankruptcy Trustee’s litigation, resulting in a $14MM D&O insurance recovery
Untangled substantial operational expenses, critical contracts, and personnel commingled with a sister company
Oversaw the company’s 1,800 employees
Negotiated with a landlord to successfully exit a $150K+ monthly lease within 3 months of the receivership appointment

Obstacles Encountered & Our Solutions

Uncovered $18MM in A/R and inventory credits disputed by large customers (Verizon, AT&T, T-Mobile) and critical vendors due to the company's poor billing and collections practices.
- Our experts reconciled company records against customer and vendor records to accurately reflect the receivership estate’s assets, avoiding significant legal fees.
- We ultimately collected $30MM in outstanding receivables from certain customers and vendors.
$18MM of inventory (including new, used, and demo phones and accessories) was scattered across 550+ Costco and military base stores nationwide.
- Our experts had the company’s legacy operating personnel coordinate the return of assets.
- We designed, received court approval, and managed an inventory disposition process.
- Our experts exercised contractual return rights to return approximately 1MM pieces of encumbered inventory to the lienholder at cost, thereby saving administrative costs and minimizing bankruptcy estate claims.
Two months into the receivership, an attorney representing a group of unsecured creditors filed an involuntary bankruptcy petition, resulting in jurisdictional oversight by the bankruptcy court.
- Our experts reported to both bankruptcy and state courts on matters related to assets, contracts, and pending motions in front of the state court.
- The appointed Bankruptcy Trustee appointed J.S. Held experts to carry out essentially all efforts previously in the process as a receiver.
- We assisted the company with preparing and filing the Initial Bankruptcy Schedules and provided reports to the Trustee for court filings.
The company’s shared services agreement with its sister company created a substantial commingling of operational expenses, critical contracts, personnel, etc.
- Our experts identified facility, software, IT, and benefits contracts needed for wind-down activities. Then, they submitted an initial motion to the court rejecting approximately 80 executory contracts to save $200,000 in monthly operating costs.
- We reconciled shared service amounts due from the sister company and collected over $1.0MM.
The company had a $150k+ monthly lease obligation for its 20,000 square foot headquarters office in Seattle that was approximately 10% occupied after pre-receivership layoffs.
- Our experts negotiated with the landlord to successfully cancel the lease within 3 months of the receivership appointment.
- Our team, the Trustee, and counsel sought to reject the lease contract in the bankruptcy case to take advantage of the benefits of bankruptcy law’s limit on damages calculation.

Key Contact

Jake DiIorio
Managing Director,
Strategic Advisory
+1 213 235 0609
[email protected]

Related Practice Areas

> Fiduciary Services – Receivers, Assignees, Trustees
We deliver unbiased, expert solutions in court-mandated and out-of-court situations that demand a third-party fiduciary, including insolvency, fraud, litigation, and shareholder disputes. Our full-service team of financial and operational experts serve as Federal and State Receiver, Bankruptcy Trustee & Examiner, and Assignee for the Benefit of Creditors (ABC), designing and implementing recovery strategies to maximize the value for all stakeholders.

> Strategic Advisory
From strategy to execution, we help clients overcome complex enterprise challenges and realize long-term, sustainable business value. The solutions we deliver are derived from a combination of technical, scientific, financial, and strategic expertise and unrivaled understanding of both tangible and intangible assets.