An MLM Blog reader pointed out something very interesting from the Chapter 11 court documents:
You do not need a legal background to get the gist of what is going on when reading the court reports. All you have to do is log on to: https://www.npginfo.com/KeyDocuments.aspx, go to ‘First Day Motions’ and then check out the filings and proceedings. The one entitled "Motion to Pay Prepetition Wages, Compensation and Benefits" is very informative. You will see that Arbonne’s monthly expense to pay its employees is approx 2.5 million/mo., Ind. Consultant commissions are approx. 11.5 million/mo., plus the cost of insurance, benefits, operating costs, vendors, etc….
These documents also explain EXACTLY why a bank would now loan Arbonne 20 million dollars. In a subsection entitled ‘Capital and Debt Structure’, Arbonne reported that on November 30th, 2009, they had 24 million in cash and cash equivalents. By the time the motions were filed on January 27th, they had 4.3 million dollars in cash. That’s a difference of 20 MILLION dollars! So in 58 days, Arbonne’s cash flow was depleted by 20 million, and for the next 60 days we can assume that while Arbonne is getting it’s ducks in a row, they will need another 20 million dollars to keep the boat afloat and its employees, consultants, & vendors paid!
One of the things experts are really concerned about as more companies go through pre-packaged bankruptcy is that companies address the financial restructuring, but many times do not address the fundamentals of what got the company into trouble in the first place. You will note that there was no talk of layoffs. That is $2.5 million dollars of overhead that does not directly relate to company sales.
The question really becomes, (outside of how this will impact your personal Arbonne business), why is Arbonne burning through their cash so quickly and how long will this new $20 loan last until they need another loan?
