The road less traveled

Protection One succeeds in its out-of-court restructuring, despite numerous hurdles
Friday, April 1, 2005

LAWRENCE, Kan. - As Richard Ginsburg, the president and chief executive officer of Protection One, tells it the company faced two choices in regards to its debt situation - a Chapter 11 filing or an out-of-court restructuring.

But Ginsburg felt a bankruptcy filing would not have been beneficial for anyone, even though the company held approximately $550 million in debt and recorded “very dangerous attrition rates” of 20 percent to 30 percent.

“Nearly 80 percent of companies in our situation would have filed for Chapter 11,” he said. “A Chapter 11 filing wasn’t good for Protection One or the industry.”

In direct contrast to the company’s debt and restructuring issues, the company metrics improved throughout the restructuring period. When the company was up for sale in 2003, it added 50,000 customers. And in 2004, when it was embattled in the restructuring process, it added approximately 54,000 accounts.

“The upside to all of the time and effort it has taken to achieve the reorganization is the company has made huge strides in its overall performance,” said Michael Barnes, president of Barnes Associates. “Even though top management had many of its days spent sweating the financial stuff, for the most part the company appears to have focused its efforts on integrating operations and developing the capability to provide high quality alarm services.”

From this point on, the company will focus on growing internally and building its new sales force. It will also look for acquisitions in areas where the company can support additional operations.

“We are actively looking to see if there are any good fits,” Ginsburg said. “We are not going to complete a transaction unless it is a good one.”

There will also be an increased focus on customer service, which Ginsburg said is fueled by the fact that Protection One, which currently has one million customers and 2,400 employees, is being directed by people with extensive experience in the industry.

“It is all about getting back to basics where the alarm guy is running the business,” he said.

Throughout the company’s journey from sale to restructuring, Ginsburg said he was aware of the rumors surrounding what the future held for the alarm company.

“I think that many people in the industry assumed we would file for Chapter 11,” Ginsburg said. “When people predict that you will fail, you tend to work harder.”

But since the announcement of the completion of the restructuring, Ginsburg said the industry has reacted positively.

“We think this is good for everyone,” Barnes said. “The company and its employees get a fresh start with a conservative balance sheet, and the new owners and debt holders have a good opportunity to make money. It is also good for the industry, as the last thing we need is another black eye.”