Fix-Corp International Inc. announced in late May that two lenders have stepped forward with enough capital to rescue the publicly traded plastics recycler from Chapter 11 bankruptcy proceedings.
The company said two of its creditors — commercial lending firm Coast Business Credit of Los Angeles and investment firm Medallion Capital Inc. of Minneapolis — have agreed to loan a minimum of $6 million and as much as $17 million to finance a reorganization plan filed on May 24 by Fix-Corp with the U.S. Bankruptcy Court in Columbus, Ohio.
Fix-Corp filed for Chapter 11 protection from creditors Feb. 17. It listed assets of $30.9 million and liabilities of $35.76 million in a March 13 filing with the court.
``This financing should finally get this company back on its feet,'' said James Trichon, Fix-Corp's new executive vice president. Trichon joined the company in April as part of a three-person turnaround team that replaced nearly all of Fix-Corp's top management, including Mark Fixler, its former chairman and chief executive officer.
The two lenders have offered to provide a seven-year term loan that will carry an annual interest rate of prime plus three percentage points. Besides earning interest on that loan, the lenders will receive two stock warrants for each dollar of financing provided.
Fix-Corp said it will not know precisely how much Coast and Medallion will lend the company until the reorganization plan is formally approved by creditors and by the court. A hearing on the plan is scheduled for June 29.
Trichon said $6 million — the minimum amount sought through the financing package — would be enough to ensure the company's plastics recycling plant in Heath, Ohio, will maintain production 24 hours a day, seven days a week.
Due to a shortage of cash to buy raw materials, Fix-Corp had to shut down its Heath plant for three weeks during April before opening again April 23, the company reported.
The plant now is operating at full capacity, but only because the company's new chairman and CEO, Mark Hershhorn, loaned Fix-Corp $750,000 through a short-term line of credit, Trichon said. In exchange for providing this ``emergency financing,'' as the May 24 reorganization filing describes it, Hershhorn received warrants to purchase $2.5 million in Fix-Corp stock prior to Dec. 31, 2005.
The company's new management has moved quickly to cut costs. In early May, Fix-Corp eliminated four full-time staff positions by shutting down its Beachwood, Ohio, headquarters and moving its head office to Heath.
``Believe me, we've looked at every paper clip in this company, and we're already achieving significant savings,'' Trichon said.
Such cost savings, combined with the scheduled increase in production, should enable Fix-Corp to generate positive cash flow within six to eight weeks, the company said in its filing.
The company plans to follow through on this plan without affecting existing shareholders, Trichon said.
``We have gone out of our way to negotiate a finance deal that would protect our existing shareholders,'' he said. ``We have been on the phone every day with our shareholders, assuring them that their holdings are safe.''
Among those shareholders is Fixler, who has remained a member of the company's board.
According to an Aug. 10, 1998, filing with the Securities and Exchange Commission, Fixler owned 4,576,393 Fix-Corp shares, which represented 15.5 percent of the company's stock at that time.
The company declined to disclose his current holdings.
``This company was forced to file [bankruptcy] due to a string of unfortunate incidents,'' Trichon said. ``There is no reason why Mark [Fixler], or any other shareholder, should have to sell their stock because of that.''