Cornerstone Products Inc.'s July bankruptcy filing has morphed into a protracted battle, as several Ohio molders refuse to give back molds, resin and inventory, and are protected under Ohio law, according to lawyers for those companies.
Meanwhile, Cornerstone has announced the shutdown of its only production facility, in Durant, Okla. All sides involved in its Chapter 11 bankruptcy filing will be negotiating during the next several weeks attempting to eke out each party's share.
Cornerstone said in court filings that Bloom Industries Inc. of Warren, Ohio; Edge Plastics Inc. of Mansfield, Ohio; and Pilot Plastics Inc. of Peninsula, Ohio, all knowingly and voluntarily waived any right to assert any liens on molding equipment in agreements with Cornerstone.
``We are working with [Cornerstone] to try to arrange for consensual sale of the molds,'' Larry Chek, the lawyer representing Bloom Industries, said in a Nov. 9 telephone interview. ``We and all the other molders began negotiations on that [Nov. 8].''
Those sales are supposed to occur with the help of auction firm Stopol Inc. of Solon, Ohio, Chek said. Stopol spokesman Bryan Kokish would not confirm the firm's involvement.
Meantime, Pilot Plastics, Bloom Industries and Champion Plastics filed the motion to have the case converted to Chapter 7 liquidation, which will be taken into a hearing Nov. 29.
In a Nov. 10 telephone interview, Cornerstone's lawyer, C. Ashley Ellis, said the firm has every intention of doing a liquidation of its assets within Chapter 11, despite the motion to have the case converted to Chapter 7.
``We intend to file a motion to employ those parties necessary to assist in an orderly sale of Cornerstone's assets,'' Ellis said. ``Cornerstone intends to contest any attempt to convert this case to Chapter 7.''
Privately owned Cornerstone filed for Chapter 11 protection from creditors in July in U.S. Bankruptcy Court in Plano, Texas, and has been searching for a buyer, but was unsuccessful in those attempts.
On Nov. 4, Cornerstone announced plans to close the Durant plant, said Tommy Kramer, executive director of the Durant Industrial Authority.
The firm has been at the site for 20 years and was one of Durant's largest manufacturers, he said. Its 550,000-square-foot site has about 40 presses. The announcement means that, as of Nov. 13, 150 jobs will be lost, Kramer said.
``It's a heartbreak,'' he said. ``I don't care what community or state we're talking about. It's a heartbreak when workers lose those jobs.''
At the time of its filing, Cornerstone officials blamed the three-headed monster known for weighing down a good majority of domestic housewares molders: rising resin costs, reliance on an ever-decreasing number of retailers, and the inability to pass through raw material price increases. Although its sales grew from $47.5 million in 2003 to $96 million in 2004, the firm's resin costs doubled in 2004.
Cornerstone outsourced part of its production to molders in Ohio, Texas and Southern California. According to court documents, the firm owes more than $3 million on those contracts.
``The debtor is looking to find purchasers and trying to recover as much money as they can for what they have,'' said Mark Castillo, a Dallas-based lawyer representing Pilot Plastics and Edge Plastics.
``The molders would love to get paid in full,'' he said. ``They're owed a lot of money. It means a lot to the molders. The court can easily determine that we've got a valid lien.''
Bankruptcies are a common malady among housewares molders this year. Aero Plastics Inc. of Leominster, Mass., filed for Chapter 11 bankruptcy protection, followed by Laich Industries Corp. of Brook Park, Ohio. Integrated Plastics Ltd. of Scarborough, Ontario, announced plans to liquidate in July.