Toy manufacturer Hedstrom Holdings Inc. has filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, citing poor sales at its Amav Industries Inc. subsidiary. The papers were filed April 11 at the U.S. Bankruptcy Court in Wilmington, Del., listing assets of $399 million and debts of $377 million.
According to Hedstrom officials, the root of its financial troubles lies in St. Laurent, Quebec-based Amav Industries, which Hedstrom acquired for $203 million in 1997. Amav is an injection molder of free-standing children's games such as pool tables, air hockey, and table tennis sets.
Amav started to struggle when it concentrated manufacturing efforts on a large deal that never materialized, said Jim Braeunig, vice president of operations at Hedstrom's Plastics Division in Ashland, Ohio.
"We had money tied up in inventory and equipment and that's when we got into a liquidity crisis," he said.
Hedstrom Holdings is the parent company of Mount Prospect, Ill.-based Hedstrom Corp. The Ashland operation is North America's fourth-largest rotational molder, according to Plastics News' 1999 survey, with $53.7 million in sales. The parent company reported sales of $380 million.
"When they realized the extent of the Amav problem last fall, what they decided to do was to sell the Ashland, Ero [Inc. in Mount Prospect] and Bedford [Pa.] facilities," Braeunig said.
That move would have allowed the firm to concentrate on Amav and try to revive its slumping sales and recoup some of its investment, he added.
But bids for the three units were "not sufficient to satisfy the creditors," Braeunig said.
Hicks, Muse, Tate & Furst, a private global investment firm in Dallas, owns 67.5 million privately held shares in Hedstrom. The investment firm failed at an attempt to reorganize the debt on its own during the past few weeks and filed bankruptcy as a last resort, Braeunig said.
He added that although all the operations are included in the bankruptcy filing, the reorganization effort will concentrate on the Amav subsidiary. A recently acquired $50 million debtor-in-possession loan from Credit Suisse First Boston and a group of other banks should assist in the Amav reorganization, Braeunig said.
"There are no plans to do anything at any of the other businesses," Braeunig added. "It's business as usual."
Hicks, Muse, Tate & Furst will consider its options for Hedstrom during the next eight to 12 months. Putting the company back up on the selling block "could very well be the outcome," he said.
Hedstrom Corp. rotomolds various toys such as plastic balls, rocking horses and battery-operated cars as well as swing sets, which are a combination of wood, aluminum and plastic.