In an attempt to block collection of a $4.1 million judgment against it, Fix-Corp International Inc. last week filed in Columbus, Ohio, for Chapter 11 bankruptcy protection from its creditors.
The top executive of Fix-Corp said he hopes the U.S. Bankruptcy Court will dismiss a court judgment requiring the Beachwood, Ohio-based plastics recycler to pay $4.1 million to the investment banking firm Chatham Partners Inc. of Ridgewood, N.J., for breaching the terms of a private placement contract.
``$4.1 million is a lot of money. We do not have $4.1 million,'' said Mark Fixler, chairman and chief executive officer of Fix-Corp. ``It can always happen that a [bankruptcy] judge will throw this kind of judgment out. That is certainly our hope.''
Fix-Corp listed the identical amount, $42.48 million, for both its assets and its liabilities in a Feb. 17 filing in Bankruptcy Court.
The filing came just one day after Cuyahoga County Court of Common Pleas Judge Nancy Fuerst lifted a stay of execution of a court judgment handed down against Fix-Corp in December by the New York Supreme Court. The judgment confirmed an arbitrator's ruling that Fix-Corp pay Chatham $4.1 million for work Chatham did on a failed attempt to place up to $5 million in debt securities.
``It was either file or [Chatham] would start taking away our furniture,'' Fixler said in an interview with Crain's Cleveland Business, a Plastics News sister publication. Instead, the company's management can focus on creating a plan to reorganize its debts and pay off its creditors in a ``more orderly fashion,'' he said.
Chatham's managing director, Douglas Johnston, declined comment. He referred all questions to Alfred Ferrer III of New York law firm Eaton & Van Winkle, who also declined to comment.
According to the filing, Fix-Corp's largest unsecured creditor is Encore Capital Management LLC, an investment partnership based in Reston, Va. Encore is owed $18 million for a series of convertible debentures — debt securities that can be converted into stock — that it bought from Fix-Corp over the past two years, Fixler said.
``We trust [Fix-Corp] will put forward the best case that it can,'' said Neil Chau, a partner with Encore. ``But whenever you have a company get into a situation like this, you can't help but worry.''
One person who thinks Fix-Corp has a good case is Warren Feder, president and chief executive officer of Gordon Bros. Capital LLC, a New York-based commercial lender that owns 7 percent of Fix-Corp's stock. Feder described the $4.1 million judgment as ``a Twilight Zone experience'' that should be overturned during bankruptcy proceedings.
``When someone wins a $4.1 million judgment for not raising $5 million, that's absurd. You would think the [bankruptcy] judge will recognize that,'' Feder said.