SED Signed $8 million Funding Facility

SED International Holdings, Inc., a multinational supply chain management provider and distributor of computer technology components and IT storage solutions, has signed a new $8 million funding facility with Allied Affiliated Funding.

“When the new board joined SED back in October 2013, SED had $17 million in debt under its facility with Wells Fargo. That number has since been reduced to zero and as we transition to Allied, we will do so without any outstanding bank debt,” said Sham Gad, chairman and CEO, SED. “Our new relationship with Allied sets the stage for SED to rescale its business with a stable source of capital for the first time since we joined the company.”

As SED continues to restructure and work diligently to cure the company’s delinquent filing status, SED provides the following brief update:

SED has spent the past eight months refocusing its business as a distributor of technology components and IT solutions. The company has exited from the housewares and consumer electronics business that resulted from the company’s acquisition of Lehrhoff a couple of years ago. By all accounts that acquisition was a catastrophic mistake by the company. An approximate $4.1 million acquisition price led to what the firm estimates to be in excess of $15 million in additional cash burn.

SED has rationalized its supplier base from nerly 100 to less than 30 core vendors. These core partners, which constitute innovative IT suppliers, provide the platform for SED to become a niche IT distribution partner to our customers.

SED has reduced its operating cost structure. The U.S. and Miami export operations have a current headcount of approximately 50, versus over 300 a year ago.

It founds a replacement tenant for our 60,000 sq. ft. Southern California distribution center and is currently subleasing approximately 8,000 sq. ft. from that new tenant.

Additionally, the company recently signed a lease to open a new 7,000 sq. ft. facility in San Jose, CA, putting SED within a 50 mile radius of many of its key suppliers and new customers.

Its export business in Miami is moving to a newer facility this month upon lease expiration.

All in all, SED estimates that its facilities expense is being reduced by over 70% as a result of these changes.

It believes the reduction in square footage is more than enough to support the scaling up of SED as the firm focuses on distributing higher margin, faster moving, IT products and solutions.

SED Latin America continues to operate soundly. The company sold our Argentinian operation to a local partner leaving SED Latin America with Colombian operations. The Argentinian businesses represented less than 10% of our Latin American revenues but represented a cash burn on operations.

SED’s relationships and credibility with its core vendor partners continue to improve as evidenced by the recent selection of SED by Seagate Technologies to be one of two distributors in supporting Seagate’s surveillance market. Seagate has followed-up with its commitment by enhancing marketing allocation to SED as well as the reestablishment of a credit line for SED. SED is currently working with its other core suppliers in attempts to obtain expanded credit lines.

SED still faces the challenge of overcoming its legacy liabilities. It has made significant progress to date on resolving many of these liabilities, however, work remains with respect to the company’s liabilities in order to complete the restructuring and growth of SED going forward.

SED has begun working with its new auditor on the fiscal year 2014, ending June 30, financial statements. The company expects that it will release its 2014 annual financials in September or October of this year.

SED’s commitment to its stakeholders remains unwavering. Lots of hard work remains ahead but SED has a team of executives and associates who are working to transform SED into an efficient operation with integrity, and a credible and loyal partner to both suppliers and customers.