Impower Returns from Chapter 11

E-mail list broker Impower has high hopes for getting back into the game after re-emerging from Chapter 11 bankruptcy protection.

The firm, which was spun off in 1999 from offline broker American List Counsel, filed for bankruptcy protection in mid-2001. But 10 months later, Princeton, N.J.-based Impower’s restructuring plan has been approved by the bankruptcy court and executives are even expecting the firm to become profitable shortly.

“We’re now very close to breakeven,” said President and Chief Executive Greg Ellis, who took over at the firm in May 2001, as it had been losing about $500,000 in cash per month and had amassed close to $20 million in debts. He led the company into bankruptcy proceedings three months later.

“I realized when I said yes [to joining the firm] that there was a significant need for restructuring, but I didn’t realize that the company was in fact insolvent,” said Ellis, who formerly served as vice president of DoubleClick’s research business. “Now that we’ve exited Chapter 11, we’re 100 percent focused on building the business and serving customers without the distraction of having to manage a bankruptcy case, which required a huge amount of effort.”

Under Impower’s reorganization plan, unsecured creditors will receive 30 percent of their claims. Twelve percent of the debt will be distributed in cash within the next three months, with the remainder being paid out periodically, beginning in January.

At the same time, Ellis said Impower had patched up its relationship with ALC, which, while operating independently, previously had been a significant source of referrals for the company.

“They are our largest unsecured creditor, and suffered very substantial financial losses as a result of Impower’s bankruptcy,” he said. “The relationship was somewhat frozen, to where ALC continued to be supportive but was no longer referring new customers to Impower, for obvious reasons. We really worked through all of those issues and both parties recommitted themselves to our marketing alliance.”

The restructuring agreement — which required Impower’s numerous creditors to agree on terms — points to investors’ faith in the health of the email marketing sector. Indeed, Impower’s sole secured creditor, Toronto-based venture capital firm Counsel Corp. , had the right to receive its claims first, which would have sunk the firm entirely and caused unsecured creditors to not be paid.

Instead, Counsel Corp. (which is not affiliated with ALC) and Impower’s other creditors agreed to the time-based payout, allowing Impower to stay in business and all creditors to recoup a portion of their debts.

Through the restructuring, Impower reduced staffing levels to around 20 — a fifth of the company’s highest number of employees in 2000 — but continues to offer nearly all of the products that it had previously, with the exception of the TransAct! cost-per-action online ad network.

“We didn’t believe we could get it to profitability, given the modest resources we could deploy at that point in time,” Ellis said.

In addition to its core brokerage business, the firm also runs a housefile management and deployment service, and its own business email database to which it promotes cost-per-action offers.

“Those three product lines are our focus,” Ellis said. “The new Impower is committed to operating profitably, reinvesting our profits in order to grow.”

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