Impower Settles Bankruptcy Suit

Impower has emerged from bankruptcy with a settlement to pay creditors one-third of what they were owed, and a plan to reach profitability in six months.

Impower, an American List Counsel (ALC) spinoff formed in 1998 to take on the list company’s interactive business, filed for Chapter 11 bankruptcy protection on Aug. 3, 2001. It owed about $26 million to approximately 800 unsecured creditors, including a claim from the largest creditor-ALC–for $13 million.

In the reorganization and settlement plan finalized Monday, the Princeton, NJ-based list company will receive $2 million and a 17.5% stake in Impower. ALC will continue a marketing alliance with Impower in which it refers clients to Impower who want to do e-mail marketing programs.

All the unsecured creditors, including ALC, agreed to take 30 cents on the dollar, said Allison M. Berger, attorney for Impower at Fox, Rothschild, O’Brien & Frankel in Philadelphia. The remainder of the unsecured creditors will be paid about $3 million.

The secured creditor, Counsel Corp., a Toronto-based company that had invested about $24 million will be paid $850,000 in cash to be paid over a two-year period and will get 17.5% equity in Impower.

Impower CEO Gregory Ellis and Thomas McCarty, senior vice president, will each get a 25% equity in the reorganized entity. The remaining equity will be reserved for employee stock options.

“We’re all relieved and excited to have made it out of bankruptcy and to be coming out the other side,” Ellis said.

“Impower had lease commitments and infrastructure designed to suit a $100 million a year business and that was not feasible,” Ellis said. By spring 2001, half of the company’s clients were dotcoms that began foundering and stopped paying their bills.

Ellis was brought on a year ago to see the company through bankruptcy. Ellis oversaw the sale of a loyalty card subsidiary, Datamark Technologies and closed the New York and a Stamford, CT offices. Impower’s staff was pared down from about 110 employees to 20 now. Infrastructure and strategy was streamlined.

“It’s all about aligning our business and our costs with the reality of the business,” Ellis said.

Now, Impower’s biggest division is the e-mail brokerage division. Also operating are the database management and the e-mail broadcast and management units. There are three offices remaining, the Princeton, NJ headquarters; Peterborough, NH; and Corte Madera, CA.

The company’s monthly operating losses have declined from half a million a year ago to about $25,000 a month now.

“We’ll be at break-even within three months and at substantial profitability in three to six months,” Ellis said.

A relationship with ALC is intact, but it is much reduced. Donn Rappaport, ALC’s chairman and CEO, held top titles at Impower as well, but resigned them last summer.

Other ALC principals were among the major stockholders. And, the companies shared real estate and infrastructure such as computer and telephone networks.

Now, Impower continues to rent cubicle space from ALC.

ALC will also continue to refer clients who want to do e-mail marketing to Impower.

“That ALC reaffirmed its strategic marketing relationship with Impower and will be generating Internet transactions for Impower to fulfill is a significant achievement of the plan of reorganization,” said Matthew H. Lubart, another Impower attorney.

ALC did not return calls by press time.

The number ALC was willing to settle on over the months “fluctuated by millions depending on what ALC had negotiated with its list clients,” Berger said.

“Finally, all the debtors realized is that Impower has value going forward, and there is only so much money available,” said Lubart.