Buying and Selling the troubled company

Overview
RuffCo, Inc. (“RuffCo” or the “Company”), a Delaware corporation based in Los Angeles, Calif., designs, manufactures and sells golf clubs. RuffCo was founded in 1978 by Charles Ruff, a local golf professional and renowned trick-shot artist with two children, Charles Junior (known simply as “Son”) and Daughter. Charles Senior (“Father”), who claims an 8 handicap, is now 62 years old and oversees nearly all aspects of daily operations. Son, a recent business school graduate with a 2 handicap, heads the Company’s sales and marketing function. The corporation is familyowned:
75% by Father and 12.5% each by Son and Daughter (who, preferring tennis to golf, plays no active management role in the Company). An old family friend, Frank Numbers, is the Company’s CFO and Controller, but owns no equity in RuffCo. The Board consists of Father (Chairman), Son, Daughter, Numbers and one outside director, John Moneybags. Moneybags, who sports a 7 handicap, is a former senior official at the bank where RuffCo has its asset-based debt facilities (the “Bank”).
RuffCo distributes its products, principally fairway woods, through a network of more than 25 distributors across the U.S. and Japan. RuffCo buys raw materials (e.g., titanium and other metals) and component parts (e.g., shafts and grips) from select high-quality vendors. The Company’s distributors sell RuffCo’s products to both on- and off-course golf shops and select sporting goods retailers.

Table of Contents
Letter to the Reader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
The Spiral of Distress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
The Bank Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Company’s Options and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . .12
Bank’s Options and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
The Negotiated Action Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Sale of the Company — Getting Started . . . . . . . . . . . . . . . . . . . . .22
Distressed Company Valuation and Application to RuffCo Golf . . . .25
The Troubled Company Sale Process . . . . . . . . . . . . . . . . . . . . . . .34
Sale of RuffCo Golf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

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