Venture Holdings Co. LLC owner Larry Winget is trying to salvage a $100 million deal to build an injection molding plant to supply Hyundai Motor Manufacturing Alabama LLC.
The plant in Prattville, Ala., would employ 600 and be one of the largest Tier 1 suppliers to Hyundai's first manufacturing plant in the United States.
The HPM Division of Taylor's Industrial Services LLC won a multimillion-dollar order to sell Venture more than 40 machines for the plant. But Venture, which filed March 28 for protection under Chapter 11 of the U.S. Bankruptcy Code, has been unable to get financing for the deal, according to bankruptcy filings.
Another firm owned by Winget is trying to get the plant built, but ``ran into the same financing problems,'' according to a motion filed Sept. 11 by Venture in U.S. Bankruptcy Court in Detroit.
Winget's company and Hyundai continue to talk, but time is running out. The Prattville City Council approved $1.8 million in tax incentives for the plant.
Hyundai asked the court in an Aug. 29 motion to force Venture either to reject the contract outright or accept it and, if necessary, assign it to Winget's other company. If the supply plant is not up and running on time, it will idle Hyundai's factory and cause losses of $1 million a day, according to the motion.
``[Venture] has failed to meet the deadlines set forth in the master schedule and is, in fact, over six months behind in meeting certain milestones,'' the motion stated.
Meanwhile, Venture's unsecured creditors want a trustee to run the company during bankruptcy proceedings, citing in their motion that Winget and the management team ``continue to demonstrate callous disregard for the fiduciary duties owed to Venture's creditors.''
Fraser, Mich.-based Venture filed its reorganization plan last week and, through its briefs, said the unsecured creditors committee's request for a trustee is ``long on hyperbole and short on specifics.'' Venture filed the plan without an agreement with that committee.
At stake is how fast and in what form a firm that employs 1,890 in Michigan and 12,000 globally will emerge from bankruptcy. If a trustee is approved, that person will run Venture's day-to-day operations and is likely to re-examine the proposed reorganization plan.
Unsecured creditors are owed between $520 million and $550 million. About $455 million of that is owed to holders of three unsecured bond notes.
Winget owns several companies other than Venture that do business almost exclusively with Venture. For example, Deluxe Pattern Corp. furnishes design, tooling, prototype and other work. In 2001, Venture paid $75.5 million to Deluxe for those services and Venture has loaned Deluxe money. A lawyer representing the unsecured creditors, Joel Applebaum, would not reveal the balance of the loan, citing a confidentiality agreement that creditors signed with Venture before the Chapter 11 process began.
Because Winget is contributing those firms to Venture as part of the reorganization plan, Applebaum said an independent eye is needed to see what they are worth, especially since Winget is to receive 100 percent of common equity of a reorganized Venture for contributing the companies.
``It's a situation fraught with the potential for conflicts of interest and problems associated with that,'' Applebaum said.
The creditors committee also wants to hire its own forensic accountant. Applebaum's motion questions the accuracy of Venture's financial reports.
Venture said all transactions and relationships between Venture and companies owned by Winget were reported in its Securities and Exchange Commission filings. Venture was not a public firm, but had publicly traded bonds. The company also has not paid the other Winget-owned companies since June 2002, except for Deluxe Pattern. The bankruptcy judge approved payments to Deluxe Pattern.
``Current management believes that appointment of a trustee could swiftly kill the reorganization and trigger a massive liquidation which would cost thousands of employees their jobs and forfeit substantial going-concern value to creditors,'' Venture's objection states. It also suggested that the request for a trustee is a ``hardball tactic to obtain leverage'' in the reorganization plan negotiations.
A lawyer not involved in the case said Chapter 11 trustees usually are reserved for cases where there is ``severe mismanagement'' and the request carries a high burden of proof.
``It has to be more than the fact that you don't like what these guys are doing,'' said George Dakmak, a partner at Detroit-based Fitzgerald & Dakmak P.C. ``You really have to back up the allegations.''
In its reorganization plan, Venture proposed paying its trade creditors 50 percent of their claim over 10 months, assuming the creditor agrees to a 60-day billing cycle and the credit terms it had with Venture in January, three months before the Chapter 11 filing. Claims less than $10,000 would be paid 75 percent of the claim within 120 days after the proposed plan goes into effect.