Equitable Bag Co. has filed a reorganization plan that proposes paying unsecured trade and other creditors 50 cents on the dollar payable over five years, the New York firm announced March 12. Equitable, a plastic and paper bag producer, filed in October 1994 for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. It said then it was unable to meet interest payments on notes and was in default on its revolving credit agreement.
Equitable's plan, filed in Delaware court, provides a slightly better deal to trade vendors that provide favorable credit terms. It proposes to pay these firms 50 cents on the dollar over three years. Its plan also gives Equitable the option of offering unsecured creditors 23 cents on the dollar at closing of full settlement of claims. Spokesman Richard Chernala said Equitable has the discretion of the option on a creditor-by-creditor basis dependent on negotiations.
Chernala said about half of the firm's annual sales, which were about $100 million last year, are derived from plastic bags. It extrudes its own film mainly from various polyethylene grades. Both of its plants in Florence, Ky., and Orange, Texas, make plastic bags. He would not disclose any capacity figures. The firm had sales of $117.2 million and a loss of $9.3 million in 1993.
Equitable mainly makes custom bags and specialty packaging for nonfood applications for retail store chains, mass merchandisers, and mail order and courier companies.
Chernala said Equitable cut employment to about 500 from a previous high of 900. It trimmed layers of management and moved its head office to New York from Long Island. Jonathan Canno, president, chief executive officer and chairman, will continue as CEO in the reorganized company. Equitable expects to emerge from Chapter 11 debt free with the exception of a $45 million revolving line of credit for working capital. Equitable's plan includes exchanging its $50 million in 11 percent senior notes due in 2004 for 1 million shares of preferred stock and about 88 percent of the common stock of the reorganized company. The preferred stock has a liquidation preference of $25 per share.
Founded as a private firm in 1919, Equitable went public in 1988.