Bag maker and packager Mercury Plastics Inc. filed for protection from creditors May 6, following a legal battle that saw the company accuse its minority owner and co-founder of starting a new company and siphoning business.
Mercury, which has plants in the United States, Chile and Mexico, said its sales dropped from $100 million to about $85 million after minority shareholder Luben Rabchev started a competing company, Infinity Packaging Inc.
Rabchev's lawyer, Allan Songstad, said a Los Angeles County judge in November dismissed Mercury's 2003 lawsuit claims against his client, but Songstad declined additional comment because that case is on appeal. Rabchev could not be reached.
Mercury, which is based in City of Industry, Calif., cited the ``severely deteriorated'' relationship between the company's majority and minority owners in documents related to the Chapter 11 case, which it filed in U.S. Bankruptcy Court in Los Angeles.
David Levene, Mercury's bankruptcy lawyer, said Rabchev's actions harmed Mercury.
``In a low-margin business, that can mean the difference between being profitable and sustaining significant losses,'' said Levene, who is a partner in the Los Angeles law firm of Levene, Neale, Bender, Rankin & Brill LLP.
Several members of the Deutsch family own 51 percent of Mercury, and Rabchev owns the remaining 49 percent. Mercury Chief Executive Officer Ben Deutsch said Rabchev no longer is involved with daily operations at the company.
Mercury, which sells a wide range of products from agricultural bags to rollstock for consumer packaging to industrial packaging for things like pallets, has taken steps to reduce costs and believes it can emerge from the Chapter 11 bankruptcy case as a viable company, he said.
``Right now the idea is to restructure the company and get the finances in order,'' he said. ``We have a lot of good customers, we have good equipment.''
Deutsch said his family is committing money to the restructuring, and the firm has secured financing from Merrill Lynch.
Levene said the bankruptcy court has not yet determined if the company would be restructured or sold.
Mercury employs about 360 at two manufacturing plants in the United States, in City of Industry and Bowling Green, Ky. The company also owns two foreign subsidiaries, Industrias Mercury S de RL de CV, in Salamanca, Mexico, and Unico Chile SA, in Santiago, which together accounted for about 11 percent of 2003 sales.
Mercury built a new plant for the Chilean operation last year, Deutsch said. The company was founded in 1986 when the Deutsch family and Rabchev bought the assets from a bank.