A Chapter 11 bankruptcy filing by film and bag extruder Orange Plastics LLC should be a temporary resting stop before the firm is auctioned off later this month.
The Compton, Calif.-based company will be the subject of a court-sanctioned bidding process that should keep its doors open, Orange Plastics lawyer Ronald Leibow said Oct. 8. Some creditors might be left hanging, but the company's survival would be assured.
One bidder - which recently purchased a bag plant from Plassein International Corp. - already has stepped forward, Leibow said. Polyethylene film producer EuroPackaging plc of Birmingham, England, has placed a $9.63 million bid for the company and is the leading candidate to purchase it, he said.
EuroPackaging negotiated with Orange before the Chapter 11 filing, Leibow said. That stalking-horse bid, an offer accepted by the selling company before official bidding begins, can be trumped by another potential buyer willing to pay a higher price.
No other parties have stepped forward yet, Leibow said, adding that he hopes to have the company out of bankruptcy and with a new owner in 30 days. A court-supervised auction is set for Oct. 28.
``[EuroPackaging] is offering as good a price as we think we'll be able to get,'' Leibow said. ``The [Chapter 11] filing was primarily to get the breathing room needed to sell the assets and enable the business to continue.''
Orange Plastics filed for protection Oct. 6 after fighting a slow economy and competition from Asian bag manufacturers. The company is one of North America's larger makers of grocery and merchandise bags and also makes industrial liners and pallet wrap. The PE film producer recorded sales of about $50 million last year and employs 187.
The company has more than 200 creditors, according to documents filed in U.S. Bankruptcy Court in Los Angeles. The largest claim is by ExxonMobil Chemical Co., with a disputed claim of $4.28 million. Other resin suppliers, compounders and even several film-extrusion competitors are listed among the unsecured claimants.
Orange Plastics owes more than $10 million in unsecured debt and another $12 million in secured liabilities, Leibow said.
The firm was founded in 1990 as part of extruder Apple & Orange Plastics Inc. The companies split 10 years later, when a group of investors, including President and Chief Executive Officer Salim Bana, purchased a majority share of Orange.
Bana did not return a telephone call seeking comment.
Apple Plastics President Gary Duboff retained a 46 percent of Orange, according to several sources familiar with the company, but did not share in day-to-day company operation.
In 2001, Orange purchased a second PE bag facility in Crittenden, Ky., from Joseph Edward Co. But in January of this year, manufacturing at that facility was shuttered and 64 workers were laid off. A company asset sale will not include that operation, which will remain closed, Leibow said.
Orange's sales have plunged during the past several years due to a variety of difficult market conditions, Leibow said. ``It all came crashing down,'' he said.
The company bought the 50,000-square-foot Kentucky site at the wrong time, said Thomas Blaige, chief executive officer of Chicago-based investment firm Thomas Blaige & Co. LLC, who follows the film market.
``Orange exemplified some of the risk in mergers and acquisitions,'' he said. ``If you expand too quickly, borrow and make wrong acquisitions rather than advancing the success of your business, it can cause a tremendous setback or cause the business to fail.''
Competitive pressures also are high in the film sector. ``A lot of film companies are on the bubble right now,'' Blaige said.
Buying Orange would mark EuroPackaging's second move into the North American market. In June the company bought a Salem, N.H., plant that makes coextruded PE bags from Plassein.
EuroPackaging is a major maker of bags and paper packaging in Europe and Asia, with sales of about $250 million last year. Officials were unavailable for comment last week. EuroPackaging plans to buy the Orange Plastics name and maintain the operation in Compton, Leibow said.
``Orange will keep running, but in a new way,'' he said.
