Nearly all of Martha Williams' creditors overwhelmingly supported her successful plan to buy back the StyleMaster Inc. housewares business, which filed March 18 for Chapter 11 protection after major customer Kmart Corp. went bankrupt.
However, one unsecured creditor, Matrix IV Inc., remains bitterly opposed to how Williams kept the company.
The Woodstock, Ill., company was one of StyleMaster's main injection molders. It claims it is owed $7.2 million from work done as far back as 1995 and was forced to lay off the bulk of its workers when StyleMaster went under.
Williams and partner William Bailes head a new company called J.R. Plastics LLC that bid on and won most of the StyleMaster assets at an April 19 auction. The firm paid $2.8 million in cash and promised $1.4 million in long-term payments for the assets. J.R. Plastics paid another $900,000 to buy two lots of molds from a bank that claimed liens on them. Those molds were not part of the general asset sale.
StyleMaster's molds created contentious issues for two creditors. Matrix and Paramount Plastics Inc. claimed liens separately on the two mold lots, but a judge ruled that StyleMaster's bank's liens prevailed. J.R. Plastics ended up buying the molds from American National Bank and Trust Co. in side deals paralleling the auction.
Matrix strenuously objected to the way the molds were sold. The lot that Matrix claimed liens on was particularly important to J.R. Plastics reviving the StyleMaster business, according to Matrix lawyer Richard Lauter.
Lauter said molders get burned when a bank's lien takes precedence. His client had counted on support under the Tool and Die Lien Act.
``Where is the protection for molders?'' he said in a telephone interview. Bank precedence in bankruptcy ``is a real problem for molders in the United States.''
Most of StyleMaster's creditors helped expedite the auction by widely agreeing to the conditions of sale. The majority of the creditors wanted StyleMaster to move forward as soon as possible.
Barring last-minute objections, which no one has intimated will happen, J.R. Plastics will formally own the assets, including the StyleMaster name, by the end of April. Throughout the bankruptcy turmoil, production at StyleMaster continued with the help of an extended line of credit from American National Bank.
Lasalle National Bank is J.R. Plastics' new financial backer.
Matrix now faces adversary complaints filed by J.R. Plastics and American National Bank. Lauter said the complaints should have no bearing on completion of the asset sales April 29. Matrix hopes to recover some of its loss in a case against Williams alleging she did not meet Matrix's payment schedule. Ray Wenk Sr., co-owner and president of Matrix, said Williams overextended StyleMaster and, in any event, should have seen Kmart's demise coming.
Sandretto USA Inc. pushed for the return of three injection molding machines after StyleMaster went bankrupt, but has dropped legal action and agreed that J.R. Plastics will buy the machines over 30 months, said Jerome Crotty, Sandretto's lawyer.
Paramount will talk to the new company to see how things might be worked out, said Paramount's lawyer Gregory Jordan.
StyleMaster owed about $16.5 million to unsecured creditors and listed assets at less than $10 million. It owed American National about $10 million. StyleMaster's 2001 sales were $21.9 million.
Meanwhile, Williams, who has received attention and acclaim for her position as an African American businesswoman, on April 24 received an Inner City 100 award at a dinner in Boston. The award is based on sales growth and the employment a company brings to economically distressed urban areas. J.R. Plastics, like its predecessor company, is on the South Side of Chicago. The Inner City 100 rankings were created by Inc magazine and the Harvard-based Initiative for a Competitive Inner City, a nonprofit organization.