Questor Moves On GeoLogistics –

In its second bid to rescue a troubled portfolio company of another private equity firm, Questor Management LLC last month purchased $67.5 million of newly issued preferred stocks in GeoLogistics, a global logistics provider. The transaction was made through Questor Partners Fund II LP.

Questor sourced the transaction through Principal Michael Madden‘s relationship with Peter Simon. The two were former partners at Kidder Peabody.

Madden said his firm was bullish on freight forwarding and logistics businesses as a whole particularly after the Sept. 11 attacks and saw “substantial” issues with GeoLogistics involving things like an over-levered balance sheet and stretched vendor payables, which could easily be fixed with more capital. “We felt that there were several areas where our turnaround skills could be utilized with respect to process improvement, technology and warehousing,” he said.

The original investors in GeoLogistics were William Simon & Sons and Oaktree Management LLC. Madden said the private equity firms wanted Questor to help them renegotiate GeoLogistics’ outstanding debt facility, which was reduced by about $30 million in the transaction.

In addition to reducing the company’s debt structure, Questor will implement its 100-day plan to help revitalize the company. “We also have several initiatives, which [address] process improvement in terms of cost reduction, order processing, establishing monthly metrics and reporting procedures to monitor the progress of the company and we’ll be putting those in place,” said Madden. “In addition, we have our brethren at Jay Alix & Associates to help implement our IT plan. We’ll also be taking a hard look with respect to all of our warehousing and processing activities.”

Madden added that his firm believes that it can strengthen the company through acquisitions and by expanding upon its market position in Europe and Asia.

This is the second example of Questor partnering up with other private equity firms that are experiencing problems with an investment in an older fund. In September 1999 Thayer Capital Partners sought capital from Questor for its publicly-listed teleservices concern Aegis Communications Group, which saw its share price drop from $3 to $1 over the course of a year. Questor invested $46.75 million in equity in Aegis for approximately a 30% interest in the company. According to Questor’s Web site, Aegis has strengthened its balance sheet, improved its operating performance and is now generating positive and increasing levels of Ebitda.

“We think we’re the best alternative available to other private equity groups who have problematic investments in older portfolios,” Madden said.