Media Contact:

J. Scott Victor

(610) 940-5802

May 12, 2008

National City Capital Markets Advises Simplicity for Children in its Sale to an Affiliate of Blackstreet Capital Management

Client Profile

Founded in 1988, Simplicity for Children, Inc. ("Simplicity") is a leading privately held juvenile furniture importer and distributor with design and distribution operations in Reading, Pennsylvania and sourcing operations in Hong Kong.  Simplicity sources 100% of its products from Asia from countries such as China, Vietnam and Indonesia.  Simplicity supplies a distinctive array of cribs, case pieces, changing tables, toddler beds, bassinets, play yards and swings to mass merchants and specialty retailers throughout the United States. 

Special Situation

As a result of rising labor costs in China, a weakening dollar, reduced export rebates to Chinese manufacturers and greater import tariffs on raw materials, Simplicity's sourcing partners increased the cost of doing business with them which resulted in a reduction in its gross margin.  Additionally, Simplicity was unable to systematically replace product SKUs at retailers which led to stale prices that did not realistically reflect input costs.  Furthermore, unforeseen legal liabilities, including a major product recall in September 2007, constrained Simplicity's working capital levels and impeded it from adequately marketing its products and developing new products.   As a result, the Special Situations Group of National City Capital Markets was engaged as the Company's exclusive investment banker to explore strategic alternatives to sustain operations while the Company repositioned its product lines and generated cash flow.

Solution

Simplicity and National City Capital Markets moved quickly to explore strategic alternatives, including a sale or restructuring.  After conducting a broad sale process and negotiating with several strategic and financial partners, professionals with the Special Situations Group concluded that the greatest value for Simplicity's stakeholders would be achieved through a sale of Simplicity's senior debt and subsequent UCC Article 9 asset sale to an affiliate of Blackstreet Capital Management ("Blackstreet").  This solution allowed Simplicity's management team to remain in place while leveraging Blackstreet's Asian sourcing and retail expertise.  The sale closed in April 2008.

"The ultimate value generated for all constituents from this successful sale was the end result of a well-managed and creative transaction structuring approach," stated J. Scott Victor, Senior Managing Director and Co-Head of National City Capital Markets' Special Situations Group. 

Other professionals who worked on the transaction include:

•           Robert Lapowsky of Stevens & Lee, P.C., counsel to Simplicity;

•           Kenneth Aaron of Weir & Partners, LLP, counsel to the shareholders;

•           Robert Katz of Executive Sounding Board Associates, advisor to the lender;

•           Tom Beane of Beane Associates, Inc., advisor to the lender;

•           Alan Noskow of Patton Boggs, LLP, counsel to Blackstreet; and

•           Matt Tashman and Derek Baker of Reed Smith LLP; counsel to the lender.