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Direct Buy, Inc.

Buying Club

"DirectBuy is a private member only buying club. We are passionate about saving our members money. DirectBuy offers an incredible selection of home furnishings, home improvement, flooring, entertainment and outdoor, and home accessories. Due to our relationship with over 700 top brands in the US, and over 500 in Canada, DirectBuy offers over hundreds of thousands of products at prices significantly less than retail. Thorough our network of franchise club locations, in-house staff and partnerships, DirectBuy offers professional design services, product selection and configuration, and delivery to its hundreds of thousands of members. At DirectBuy every story starts with saving." From the LinkedIn Profile. The Company filed for bankruptcy in November 2016, seeking a buyer.

BDC Credit Reporter View

Direct Buy, Inc. has been in financial difficulties for years as the business model has not been sufficiently successful with consumers, and changes in retail buying patterns away from brick and mortar stores to e-commerce have hurt revenues and increased capital expenditure requirements. The balance sheet was restructured in 2012 with $324.7 million of debt exchanged for 100% equity in the holding company and $100 million in pay-in-kind toggle notes due in 2019. However that debt burden, which comes due in 2019 with a cost of $190mn ($11mn due in February 2017) and multiple lawsuits, have caused the Company to file for bankruptcy protection and seek a third party buyer. Sales are down to $56mn and EBITDA is negative. A prior search for a buyer-with 80 potential leads contacted-failed to attract any interest. A stalking horse bidder called Derby SPV has offered up $10mn. The bankruptcy court will be ruling in early January 2017.

Only one BDC has exposure to the Company-Solar Capital or SLRC, part of that original group, and which first invested $41mn. As of September 2016 the debt was carried at a cost of $8.5mn given prior Realized Losses, although the principal amount was higher due to the accumulated PIK interest. The FMV was $1.3mn, written down by 84%. The BDC Credit Reporter has the Company as Non Performing, the Credit Rating at 5 given the anticipated-but much delayed-Realized Loss foreseen and the Credit Trend Down as even the current valuation may be higher than the final price after the expense of bankruptcy is figured in.