DETROIT — After more than a year in Chapter 11 bankruptcy protection, Key Plastics LLC has a new owner that comes complete with long-term goals to help the company grow into an international powerhouse auto supplier.
U.S. Bankruptcy Judge Steven Rhodes in Detroit approved the sale of Key's assets to Carlyle Management Group on March 30 in a deal worth an estimated $175 million, including cash and assumption of some debt.
The Novi, Mich.-based molder of interior, exterior and under-the-hood parts entered Chapter 11 on March 23, 2000, with more than $300 million in debt and about $500 million in annual sales. The final value of the sale is $13 million less than Carlyle's original offer of $188 million, first made — then withdrawn — early this year.
In court documents, Carlyle stated its long-term goals are to make Key the "preferred global Tier 11/2 supplier" to the auto industry, providing "a basket of plastics products."
To do that, the company will have to put more money into Key to boost its size, product breadth and in-house design and engineering. Carlyle already has committed to $40 million in equity for working capital and has provided for a working line of credit.
Dallas-based Carlyle Management is an affiliate of Carlyle Group of Washington, a private equity company. B. Edward Ewing, Carlyle Management chief executive officer, will take over as CEO of Key, but most top management for the molder will remain in place. The official takeover company is called Key Acquisition Co.
Carlyle's plan won the support of both secured and unsecured creditors, said Key lawyer Sandra Mayerson.
The plan does call for debt holders to receive at least some money, but the exact dollar could vary. For instance, the package for most unsecured creditors includes $1 million in cash plus a share in the proceeds from the sale of a parcel of land in York, Pa.
It could take months or years for the final settlements to pass through the system and into creditors' hands, noted Martin Fried, a Southfield, Mich.-based bankruptcy lawyer.
"There are a myriad of unknowns," he said. "This is just one more step in the proceedings."
In the court filing, Key's lawyers blamed a "series of events" leading to the company's financial downfall, including acquisitions in 1998 and 1999 that helped Key add $200 million in annual sales but never performed up to the company's expectations. The company also was dealing with performance problems and low-bid contractual obligations that strained the cash flow.