Sandretto USA Inc. wants its machines.
Matrix IV Inc. is fighting for its molds.
Martha Williams is struggling to keep StyleMaster Inc. as an ongoing operation, in the midst of a financial crisis that pushed the Chicago injection molder into Chapter 11 bankruptcy March 18.
Hearings resume April 1 in the drama as U.S. Bankruptcy Judge Jack Schmetterer in Chicago is expected to rule on StyleMaster's plan for a fast-track sale, which company officials maintain is the only way to save the firm. Officials blame StyleMaster's problems on Kmart Corp.'s bankruptcy, since the big-box retailer generated about half of StyleMaster's sales.
StyleMaster's lawyers have proposed selling the company's assets the week of April 15. Meanwhile, Williams and her backers have secured financing through Chicago's LaSalle National Bank to buy back the company.
Sandretto's lawyers filed a motion March 28 to retrieve three machines from StyleMaster's plant on the South Side of Chicago.
That scenario can play out in two ways, said Jerome Crotty, Sandretto's lawyer. If the judge grants the motion, Sandretto could take the machines. If the judge denies the motion, Sandretto could credit-bid for the equipment - a bid of up to the amount of the debt StyleMaster owes on the machines.
``Either way, we hope genuinely that StyleMaster survives and that matters work well for all secured as well as unsecured parties,'' Crotty said in a March 28 telephone interview.
Michael Gesas, StyleMaster's lawyer, said the company is negotiating with Sandretto to resolve the issue before an April 1 hearing.
``We had a very good day in court and we have huge support,'' Gesas said March 28.
He said Kmart and Wal-Mart Stores Inc. have confirmed their support for StyleMaster. A Kmart spokeswoman would not comment.
Separately, Matrix IV Inc.'s lawyers filed a motion to have the voluntary Chapter 11 reorganization converted to Chapter 7 liquidation.
The March 27 motion claims liquidation would be in the best interest of StyleMaster's creditors because rehabilitation of the company is not likely.
Matrix IV President Ray Wenk Sr. said the filing was something his lawyers were doing and he has no opinion on the move. The company's lawyer, Richard Lauter, did not return calls seeking comment.
Matrix IV and StyleMaster remain at odds. On March 26 StyleMaster's lawyers amended the company's sale plan - which still must be approved by the court - to exclude Matrix IV's molds from the auction. Matrix IV handled more than 70 percent of StyleMaster's outsourced production. On March 28, Schmetterer approved an injunction filed by StyleMaster to protect the molds.
``We've heard some threats that they were going to be damaged and this was a way to prevent that from happening,'' Gesas said.
Still, Matrix IV's Wenk maintains the molds are his and he will fight for them.
``We will be defending the Tool and Die Lien Act as well as their guarantees and assurances that were given to us by Martha Williams personally and for StyleMaster that the molds were collateral at all times,'' Wenk said in a March 28 telephone interview. ``If we didn't have those and the act, we wouldn't have allowed our debt to become what it is to her.''
Wenk claims StyleMaster owes Matrix IV $7.3 million, including $6.7 million in past-due invoices, plus outstanding balances on raw materials and finished goods that were produced for open purchase orders and not yet sent to it.
As for a potential sale, Wenk commended the judge for making sure StyleMaster will have time to advertise an auction of its assets.
``It cannot be an insider's job, as [StyleMaster's] efforts to date have shown,'' Wenk said. ``I strongly urge all interested parties to get in there and bid.''
Still in the fight
Williams, in a March 29 telephone interview, said she's still fighting and she won't sling mud at anyone.
``This is a very tough time for everyone,'' she said. ``It's probably very difficult for everyone to understand what's going on. My main objective was to try to save StyleMaster and the jobs of the employees and keep the company in Chicago, which is what I worked to do my entire career.
``Matrix has been a good supplier to me. We've had a good relationship over the years. In hindsight, should we both have diversified? Probably. Unfortunately, we just aren't psychic. The Kmart bankruptcy came so fast and furiously, there was no time to react,'' she said.
``I'm trying to step back from the situation, remove the emotion. I love this company; I love what I do. I'm very emotional about my employees. They're my extended family, in reality. But I have to be professional. I have to make the best possible business decisions.''
At this point, no one involved in the case opposes a sale, said Richard Laverty, president of Chicago Mold Engineering Co. Inc., based in St. Charles, Ill. Laverty has been appointed chairman of the official creditors committee, which formed March 28. The committee includes seven unsecured creditors, including Duraco Products Inc. of Streamwood, Ill.; Goldmark Plastics International Inc. of New Hyde Park, N.Y.; and American Eagle Packaging Corp. of Elgin, Ill.
Laverty said the best scenario would have Williams buying back the company.
``To the creditors, that seems to be the best alternative going forward,'' Laverty said in a March 29 telephone interview.
In the creditors meeting, however, there was a lawyer present for an out-of-town interested party who might purchase StyleMaster and move its operations out of Chicago.
``We have a far less chance of doing business with that company than we have doing ongoing business with Williams,'' Laverty said.
