Clover Technologies Group, the world’s largest collector of used printer cartridges, is suffering financial problems caused by heavy debt and the loss of two customers.
Headquartered in Hoffman Estates, Ill., the company plans to enter discussions on restructuring about $650 million of debt. The move comes after Clover disclosed in July it lost major customers, including AT&T, according to The Wall Street Journal. Meanwhile, the company’s debt has been downgraded to a “very high credit risk.”
Clover Technologies Group has 60 locations in 18 countries and 19,000 employees.
The company’s Clover Imaging Group business unit collects empty printer cartridges – e-scrap companies are a major supplier to the firm – and remanufactures them. It says it’s the world’s largest seller of remanufactured laser and inkjet cartridges.
The company is also a global supplier of recovered printer parts. In 2016, the most recent year for which the company published a sustainability report, Clover Imaging collected 44.8 million used cartridges and printer parts (nearly 90% of which were collected in North America) and remanufactured 17.9 million cartridges and printer parts.
The company’s Clover Wireless business unit provides mobile device repair, refurbishment and parts harvesting services for carriers, OEMs, retailers and others. The company says it operates the largest mobile device repair center in North America. In 2016, Clover Wireless collected 4.5 million wireless devices and repaired nearly 2.7 million of them.
Financial struggles
The Wall Street Journal reported that, in July, Clover’s parent company, 4L Holdings, disclosed to investors that one of Clover Wireless’s largest customers, AT&T, decided to buy refurbished older phones directly from OEMs instead of Clover Wireless and other vendors. 4L also disclosed it expected to lose an unnamed customer in the Clover Imaging unit.
At the same time, Bloomberg reported, Clover Technologies also significantly reduced its earnings forecasts.
Moody’s then lowered Clover’s rating to a level indicating its debt is a very high credit risk, just above the “likely in, or very near, default” rating.
After the news, the value of the company’s $693 million in leveraged loan debt tanked by one-third, sending shock waves through Wall Street, according to a follow-up Bloomberg article.
Clover has hired debt restructuring advisers, which is often an indication of a pending debt restructuring or bankruptcy filing, Wolf Street noted. Meanwhile, creditors have hired a law firm to advise them during discussions of restructuring Clover’s substantial debt.
