Private equity firm H.I.G. Capital LLC has signed an agreement to buy the assets of injection molder Brookfield Group LLC.
Brookfield has struggled with heavy debt since its 2001 formation. H.I.G. already is the company's senior lender.
The companies signed the purchase agreement on Jan. 27, said Mark Cantor, Brookfield's chief restructuring officer, and he expects the deal to close within 90 days. On Jan. 28, the West Brookfield, Mass.-based company filed for Chapter 11 protection from creditors in U.S. Bankruptcy Court in Worcester, Mass. The sale is subject to court approval.
``Operations are positive cash flow, but it just had too much debt and it was sinking under the debt,'' Cantor said in a Jan. 30 telephone interview. ``We have been looking for a partner to refinance and recapitalize. Operations will continue. In any event, it will be a much stronger company for having gone through this process and it will have a much stronger balance sheet.''
Chief Executive Officer Chris Nesbitt resigned in November, and Cantor was appointed chief restructuring officer from Morris Anderson & Associates Ltd., a Chicago turnaround firm. Cantor will act as interim CEO until the new buyer appoints someone.
Brookfield formed in 2001 via the merger of SciTech Plastics Group LLC, and Brookfield Group. But Cantor said the company never has been profitable and its financial situation has continued to deteriorate, affected by many factors including the impact of foreign competition, a weak domestic economy and pricing pressure from customers.
``There are components of our business that have been greatly affected by Far East competition, particularly on the tooling business,'' Cantor said. ``The focus of this company has been on medical plastics and medical devices. For the most part, that has not gone offshore. It's that strategic focus which has allowed the company to survive and ensure its future success.''
Medical business generates about 70 percent of the firm's plastics sales.
According to court filings, the company has made numerous attempts to restructure debt and bring new equity to rectify the undercapitalization. But a capital infusion never materialized, so the company reacted by reducing costs, such as head count and redundant expenses among facilities.
H.I.G. became the company's senior lender on Dec. 31, when a unit of H.I.G. bought SciTech's bank debt from Key Corporate Capital Inc. and Comerica Bank. H.I.G. has offices in Miami, Boston, Atlanta and San Francisco.
Brookfield's services include product design, rapid prototyping, mold building, assembly and secondary operations. The company employs 430 at injection molding sites in Marlborough, Mass.; West Hatfield, Mass.; Constantine, Mich.; and Sanger, Texas; and at tooling sites in West Hatfield; Constantine; and a prototyping center in Hudson, N.H.