Restructuring Advisory/Chief Restructuring Officer Services

Consensus’ Christopher Ellis was appointed Chief Restructuring Officer of L.I.D., Ltd in late September 2007, and Consensus was simultaneously appointed financial advisor. Initially, Mr. Ellis and Consensus were charged with analyzing the Company’s markets and prospects, and preparing a business plan for presentation to both management and LID’s secured lender group. This report was prepared during the first 45 days of the engagement, and covered in detail a number of alternative strategies for the company. The business plan concluded with a recommendation favored by the bank group but which was rejected by the owners, as it involved the liquidation of a significant portion of the Company’s $70.0 million of diamond and jewelry inventory.

In lieu of the Consensus plan, the Company filed a unilateral plan of reorganization in December 2007, which was unacceptable to the banks. A compromise among the factions was mediated by Mr. Ellis, and was entered by the Bankruptcy Court a few days later in modified form.

The final settlement allowed for the owners to repay $27.7 million to the banks over three months, 70% of the amount owed to the banks, during which time the Company and its assets were to be managed by Mr. Ellis and Consensus. Ultimately, the owners were unable to raise the capital necessary to fund the settlement in this timeframe, and the banks asked Mr Ellis to liquidate the collateral for the benefit of the creditors.

Contemporaneously, Mr. Ellis initiated a full recall of more than $30.0 million of L.I.D. goods held by retailers on consignment. Over the next six weeks this recall was completed, and an inventory sale process began. Consensus personnel contacted over 200 prospective buyers of diamonds and diamond jewelry worldwide, assembled and distributed detailed inventory data to the several dozen companies who registered their interest and eligibility. Consensus and its colleagues at GemWorld, held dozens of viewings of the inventory assembled in New York. Stalking horse bids were negotiated and executed separately on the loose diamond parcels and the finished jewelry.

Ultimately, Consensus ran a robust auction participated in by more than a dozen bidders, yielding a recovery of approximately $33.0 million—significantly higher than the amount previously negotiated in the bi-lateral settlement. This auction outcome, together with additional distributions we were able to make on other assets such as receivables, resulted in the banks recovering over 90 percent of their outstanding loans. Non-insider unsecured creditors are also expected to have a meaningful recovery as a result of this process.