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Mar-Kay Plastics Inc. recently filed for protection under Chapter 11 of the U.S. Bankruptcy Code, and has closed its Morristown, N.J., plant to reduce debts.

The company's principal lender, Mercantile Business Credit Inc., cut off Mar-Kay's funding, resulting in ``severe cash-flow problems and extreme difficulty in continuing its day-to-day operations and payment of its trade debts,'' according to documents from U.S. Bankruptcy Court in Kansas City, Mo.

The Kansas City blow molder lists total liabilities of $13.1 million, including $4.1 million owed to MBCI. Mar-Kay's assets total $15.5 million, of which one-third is money due from its parent company, Mar-Kay Enterprises Inc.

Since the Jan. 17 emergency filing, MBCI has agreed to fund Mar-Kay on an interim basis.

In court documents, Mar-Kay stated that by closing the Morristown plant, consolidating operations in Kansas City and ``selling substantial assets to reduce its debt to MBCI,'' it anticipates improving its cash flow and will reorganize its debts. Mar-Kay President William Scott would not disclose any information about the company's operations.Mar-Kay has 1.1 million shares of common stock held by 52 shareholders.

Plastics News estimated Mar-Kay's sales at about $20 million last year, when it placed 60th in the annual survey of North American blow molders. It has more than 200 employees and serves the still water, food, motor oil, pharmaceutical, household chemical and personal-care markets. The firm won attention about five years ago for its pioneering work making extrusion blow molded PET bottles with handles.

According to a report in the Kansas City Business Journal, Mar-Kay nearly had a deal last year that would have allowed it to pay its debt in full. The report said MBCI pressured Mar-Kay Enterprises to sell its stock to Reid Plastics Inc., an Arcadia, Calif.-based blow molder. According to the report, that deal fell through, prompting the Chapter 11 filing.

Officials from Reid, with estimated sales last year of $100 million, could not be reached for comment before deadline last week.