Jewel box injection molder NexPak Corp. has filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The Uniontown, Ohio-based company said it expects to emerge within months with new ownership and significantly reduced debt.
The filing caps a 15-month effort to reposition NexPak. The revamp is designed to reduce and restructure NexPak's debt without any business interruption and to expand the operations, Vincent C.M. Leesberg, president and chief executive officer, said in a July 19 telephone interview.
Nexpak's secured lenders will finance the reorganization and expect to be equity owners of the firm. They include Highland Capital Management LP of Dallas and the New York office of Deutsche Bank AG.
``Lenders have signed up and are on board for the reorganization,'' said Kevin McShea, chief restructuring officer since January. McShea is an independent subcontractor for turnaround-management company RKG Osnos Partners LLC of New York.
The lenders will take over control from current owners, which include Palladium Equity Partners LLC of New York, a private investment firm that owns about 69 percent of the voting shares of NexPak's common stock, according to a court filing.
NexPak and its domestic subsidiaries, which also filed for bankruptcy protection, had 2003 sales of about $197 million and, as of March 31, had assets of $101 million and liabilities of $209 million. The largest unsecured trade debts are owed to Chevron Phillips Chemical Co. LP of Chicago, $2.8 million; BP Amoco Chemical Co. of Naperville, Ill., $1.7 million; and Atofina Petrochemicals Inc. of Hapeville, Ga., $1.2 million.
The company filed the petition July 18 with U.S. Bankruptcy Court in Canton, Ohio. The next morning at a formal hearing, Judge Russ Kendig reviewed the firm's reorganization plan.
Principal lenders Highland Capital, Deutsche Bank and others have agreed to provide financing of $37.7 million during the reorganization and $85 million for long-term liquidity after the Chapter 11 process is completed. McShea said NexPak might emerge from bankruptcy in four months.
The secured lenders intend to convert $97.9 million of debt into equity, effectively reducing NexPak's funded debt by 60 percent.
NexPak formed in 1999, initially as Mediapak Corp., as a result of a series of acquisitions by Palladium in 1999. Those acquisitions included:
* Atlanta Precision Molding Co. Ltd. of Duluth, Ga..
* California Precision Molding of El Dorado Hills, Calif.
* Alpha Enterprises Inc. of North Canton, Ohio, including Mercury Foam Inc. of South Hackensack, N.J., and Camarillo, Calif.
* Joyce Molding Corp. of Rockaway, N.J.
The bankruptcy filing does not include Europe Precision Molding BV of Helmond, the Netherlands. EPM had 2003 sales of $37 million, McShea said.
Leesberg joined a NexPak predecessor in Europe in 1993 and, in March 2003, was tapped to run the entire company. Simultaneously, NexPak ownership recruited consultants on how to cope with the firm's highly leveraged balance sheet, rising material prices and consolidating customer base.
NexPak employs about 600, plus 75 temporary workers, in the United States, and another 65 in Helmond. The company primarily makes jewel boxes, DVD and computer game cases and special promotion packaging. Key customers include movie studios, media replicators and duplicators, record labels and video game manufacturers.
Major North American competitors include the AGI Media operations of Stamford, Conn.-based MeadWestvaco Corp.'s packaging segment and Hong Kong-based Viva Group Ltd.'s Canadian operations in Delta, British Columbia, and Scarborough, Ontario.