The circumstance Bill Rodgers & Co. now found itself in was awkward indeed, and the dialogue between management and the company's new loan officer, Jack Bradley, did not get off to a propitious start. At their first meeting in mid-January, Bradley brought up a $138,000 debt with the bank's London office, left over from the ill-fated British expansion; he said he wanted to fold it into the current repayment formula. Yahn replied that such a change would cripple BRC's cash flow and insisted the debts stay separate. Bradley demurred, but at their next meeting he fired a larger shot across their bow: as of February 1, a new repayment formula would take effect. The old advance rate of 80% of new sales would remain intact; in the future, however, the company would hand over the remaining 20% of all cash receipts, to be applied directly to the loan paydown. No longer would that money be available as working capital.
At first Yahn surmised that Bradley simply didn't understand the implications of what he was proposing. On February 18 he composed a memo to Bradley, spelling out those implications. "Obviously, very rapid debt reduction takes place [under the new formula]," he conceded, "but there is not enough cash to operate the business." He then essayed a compromise: cut the 20% of cash receipts down to 10% and administer the formula as before. To counter two of Bradley's concerns, he also pointed out that the bank would still be protected against declining cash receipts in that a) it was lending only on 60-day receivables, and b) there was a cap on the total advance available. Yahn concluded with a plea that BRC be allowed to make "an orderly withdrawal from the bank."
"During this entire time," he wrote, "Bill and I have been very cooperative. Subordinated debt was put in by the stockholders when required. We have both pledged a large majority of our assets to secure the overadvance, so that the Bank would not be taking an equity risk. . . . Ody has invested a considerable amount of money under the belief that we would have a reasonable amount of time to resolve our situation. I feel that the Bank should . . . allow us enough cash flow to operate while we seek replacement financing."
Yahn's plea fell on deaf ears. The question was, why? Why was the bank suddenly pressing for a new repayment formula (one that even Hartman later termed "draconian") when the old formula had apparently been working as it was supposed to? Had the bank lost faith in the company's ability to repay? Or was Bradley gambling, as some suspected, that Ody Cormier's deep pockets would keep BRC from going under? If so, then he badly misread the new owner. Informed by Bradley that the bank wanted him personally to guarantee the overadvances, Cormier refused. "bradley told me that I already had a sizable investment in the company," remembers Cormier, "and I'd better sign the agreement. There's no question he was putting a gun to my head. If he didn't know me then, it didn't take him long to find out."
Cormier came back with one more counterproposal, whereby the bank would handle BRC's receivables through its own in-house factoring division, in return for which the company would cease shipping to overdue accounts. In addition, the bank would let BRC take all the "good" (that is, current) inventory and flush it out through the system, at full value on the dollar.
Bradley wouldn't budge. He told Cormier and Yahn that he didn't want anyone "cherry-picking" the inventory and that the new formula was "cast in stone." Things went downhill from there.
Over the ensuing weeks, Yahn and Cormier debated a number of emergency alternatives. The most logical one was to take Bill Rodgers & Co. into bankruptcy court, liquidate its assets, set up a successor company, and buy the existing BR inventory from the bank, using the proceeds from its sale to pay off the loan. Ultimately, however, they rejected this course of action -- first, because it would mean blowing off their creditors, who had stuck by them during tough times; second, because they didn't want to risk losing credibility in the marketplace by stopping production. "Besides," adds Yahn, "bankruptcy didn't seem like a good career move."
On Friday, April 3, Yahn's lawyer called to say that he'd been sent a hand-delivered letter from Bradley demanding full repayment of the $1.3-million loan balance. When Yahn finally reached Bradley, the loan officer was gruff. "Negotiations have gone on long enough," he said ominously. "If you won't take action, we will."
Yahn spent the weekend discussing the situation with Rodgers and Cormier, and they decided to hold a board meeting in Boston on Tuesday afternoon. On Monday morning, Yahn called Bradley back and informed him of the board meeting. The two agreed to meet at the bank at 10:00 a.m. on Wednesday.
At 7 o'clock Tuesday morning, Jack Bradley turned up at one of Cormier's plants. With him was a driver and a moving van. Cormier was away. They told the plant manager, Carole Wallace, that they had come to pick up the BRC inventory. She blocked the door and ran back to call Cormier. He was not amused. For one thing, he did not believe the bank had any legal right to take so much as a drawstring out of his factory. For another, the goods on his shop floor belonged to other customers besides Bill Rodgers & Co., and Jack Bradley was hardly capable of identifying which was which. Cormier had Wallace tell them to get lost.
"Then they asked to use the telephone," she recalls, "and while they were on it, Ody called back on the other line and told me under no circumstance to let them make a call. There wasn't much I could do, so I pushed the button down on them." Vowing to return with a court order, Bradley left. Meanwhile, Ody Cormier made two more phone calls -- one to his attorney, and one to Rob Yahn.
