Revive the Mason and Hamlin Piano Company (M&H)
By 100631.17@compuserve.com, forwarded by Terry Smythe
Forwarded Message:
From: 100631.17@compuserve.com To: ALL Orig: MBNET
Subj: STEINWAY and MASON & HAML Area: 0-sic.makers.piano Date: 03/04/96
=============================================================================
We are a large, successful US piano rebuilder, gearing up to revive the Mason & Hamiln Piano Company (M&H).
During the past century, the M&H piano has achieved wide recognition as a premier grand piano, one of the few to rival Steinway. Unfortunately, during the past few years, the company has been a victim of over borrowing and gross mismanagement. It is currently working its way through bankruptcy, with the former owners / managers now removed from the picture.
As a trade buyer, we now seek to incorporate M&H into our current operation, and commence production of quality M&H pianos. Our decades of rebuilding experience (almost exclusively Steinway and M&H grands) and large skilled labor force will enable us to manufacture new M&H's at a level of uncompromised quality. Our philosophy has always been, and will always remain, to concentrate on quality. In the long term, we have found that this is the best way to insure success.
It may be part of our strategy to issue a very limited number of piano bonds:
A bond would cost $50,000 and pay cash interest of 6.0% annually for 7 years. In year 7 the bond would be redeemed at par- full repayment of the $50,000. In addition, we would provide the investor with a newly built M&H grand piano, for free, in one year. (We could also be open to discuss the substitution of a fully rebuilt and refinished Steinway grand). The value of a new M&H or fully rebuilt Steinway is $25,000 - $30,000. If for whatever reason there is not complete satisfaction with the piano at the time of delivery, we would guarantee to `unwind' the bond and return the investment in full, plus the 6% interest. The bond would be secured by the stock of our company.
Numerous companies have successfully issued similar bonds that incorporate distribution of their products. For example, the Mount Snow ski resort in Vermont recently issued interest bearing bonds that included free 5-year long ski passes. These securities benefit all parties- the company, as it enables it to raise money more cheaply than through the bank, and the investor, because he/she essentially receives a product for free.
Would anyone be interested in investing in one of the few available piano bonds, if issued? Reply via e-mail.
[ Editor's Note: This is quite interesting. I have no idea whether
[ this is legitimate. However, it has generated a lot of traffic in
[ the newsgroup rec.music.makers.piano (and a few others). The
[ poster of this "offer" has published additional information, which I
[ enclose below. Please be aware that even well intentioned business
[ plans fail. Please do your homework carefully before sticking
[ your neck out!
[
[ Jody
From <100631.17@compuserve.com>
Organization CompuServe Incorporated
Date 7 Mar 1996 19:24:01 GMT
Keywords steinway, piano
Newsgroups rec.music.makers.piano
Message-ID <4hnd4h$f6s@dub-news-svc-6.compuserve.com>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Since our initial `piano bond' posting, we have received numerous inspiring responses, many requesting further information and clarification. The following addresses common queries:
Who are we?
We are Faust Pianos, a large, very profitable privately owned rebuilding / retailing operation in NY. We concentrate on the restoration of Steinway and Mason & Hamiln grand pianos, have been in business for two decades, and are among the largest Steinway rebuilders in the world. Our reputation is based on the quality and consistency of our work. We carry a regular inventory of around 100 Steinway and Mason grands, and rebuild about 130 annually.
What has happened to Mason & Hamlin?
The cumulative effects of over-investment, damaging acquisitions, over-leveraging and mismanagement forced Mason & Hamlin into Chapter 11 bankruptcy. About a year ago, just prior to the bankruptcy, the owner / manager sold his entire interest for a nominal sum to a small Boston outfit, Premier Pianos. Since then, Premier Pianos- the `debtors in possession' has only completed building out a small number of pianos (the existing work-in-progress) and compiled an unsatisfactory plan of reorganization. They now appear to be out of the picture. Unsurprisingly they have not been able to raise the cash necessary to revive the company.
What will happen with Mason & Hamlin?
From the outset of the bankruptcy proceedings, Faust Pianos has
been interested in resurrecting the company. The combination of our resources, network, size and know-how will enable us to successfully build new quality Masons. We intend to integrate Mason & Hamlin with our current profitable rebuilding operation.
It should be noted that there is not a significant difference between fully rebuilding a piano and building a new one. Beyond rebuilding
an old grand piano, manufacturing a new grand primarily entails cutting and bending wood to construct the case, furniture parts, and constructing a keybed and action frame. Production of a new piano's essentials, principally the `belly' and action, basically incorporates the same procedures as for a rebuilt piano. We will employ those same methods as in our current operations, which we perform to the highest possible standards. The new Masons that we will produce will be built likewise. We will build the M&H piano into that of its former self.
What's the deal?
Through our own resources and financial backing from an established venture capitalist (VC), we have secured the money required to pay off
the current creditors and fund all expected operating start-up losses. We will not incur additional debt for these purposes.
We are not looking to issue bonds to help purchase the company or fund initial operations. However, it is our intention to `recapitalize'
the company once it is under our direction and becomes profitable. In other words, we would look to `buyout' the VC as soon as practicable. The VC, along with ourselves, is incurring all the start-up risk associated with merging our rebuilding operations with Mason and Hamlin, and for this, the VC will receive a return to compensate for such risk.
However, once the company is back on its feet, there will be no need to retain the VC. Although any equity investment by the VC will not `charge' interest, his required return will be dilutive to our ownership an earnings. Therefore buying the VC out with debt (the bonds) will effectively provide us with less expensive money.
The Bonds:
Although we have not yet determined to issue the bonds, and thus have not finalized terms, they might take the following shape:
We would offer a range of bonds. Principal amounts would be dictated by various piano contributions. For example, a 10-year $50,000 investment would pay cash interest of 6% and provide a new M&H `A' in year 2. A principle investment of say $75,000 with the same maturity and interest characteristics would provide the investor with a new M&H `BB.'
Likewise, we could just as easily issue bonds for rebuilt Steinway's (or Mason's):
A $50,000 investment (terms as above) would be coupled with a fully rebuilt Steinway `M'
A $60,000 investment (terms as above) would be coupled with a fully rebuilt Steinway `O' or `L'
A $70,000 investment (terms as above) would be coupled with a fully rebuilt Steinway `A'
A $80,000 investment (terms as above) would be coupled with a fully rebuilt Steinway `B'
Any bonds that we issue would be senior to all other investments in the company and would be secured by the inventory of Faust Pianos (NB- Faust Pianos carries no debt on its balance sheet).
With respect to the investor's flexibility of choice, we would allow the investor to play and choose his/her piano from our entire inventory. We would give all investors the right to unwind the bond if he/she is simply not satisfied with the finished product.
We do not have to issue these bonds, it simply may be in our financial interest to do so. Yet we are considering piano bonds because they are a cheaper source of capital. The strength of our balance sheet enables us to readily raise bank (or other) debt. Yet we will consider issuing piano bonds because they are a cheaper source of capital. Producing a piano (new or rebuilt) costs us less than the value attributed to it by our customers/investors. It is only this disparity in cost / value that makes the creation of this security possible.
The high effective rate of interest achieved by our investors (in excess of 15% IRR) occurs through the arbitrage between the cost of manufacturing and the retail value of the pianos. These bonds will be safe, high yielding, and will help the new Mason & Hamlin company grow into the company it should be.
We hope the above begins to answer many of the issues and questions raised by our initial posting. Please feel free to ask further. At the end of the day, these bonds make sense for all parties.
If anyone might be interested (or knows someone who may be interested) in investing in one of the few available piano bonds, if issued, please reply via e-mail.
Dorian Faust |
(Message sent Thu 7 Mar 1996, 22:57:04 GMT, from time zone GMT-0600.) |
|
|
Mechanical
Music Digest™ Archives
