Hampered by debt amid low operating margins, the parent of WinCup Holdings Inc. filed Aug. 21 for Chapter 11 protection from creditors in U.S. Bankruptcy Court in Wilmington, Del.
Disposable food-service products firm Radnor Holdings Corp. owns Phoenix-based thermoformer WinCup and StyroChem, which makes expanded polystyrene for cups.
As part of the bankruptcy proceedings, Radnor has agreed to sell its assets for more than $200 million to TR Acquisition Co. Inc., a subsidiary of Tennenbaum Capital Partners LLC. Tennenbaum, a private investment firm in Santa Monica, Calif., has been selected as the ``stalking horse'' bidder for the sale by auction, according to court documents.
``Under the current plan, everything would be sold to Tennenbaum,'' a Radnor spokesman said Aug. 23 by telephone. ``But that's subject to higher or better offers. We will evaluate all such offers that are received.''
For now, the spokesman said, Radnor's plan is to sell all facilities to Tennenbaum with no plans for either company to close any sites. Tennenbaum would not elaborate on its plans for Radnor, Pa.-based Radnor. Three people, along with Tennenbaum, own voting common stock: Radnor Chief Executive Officer Michael Kennedy owns 480 shares, or 80 percent; John McNiff and Radnor Executive Vice President Radcliffe Hastings each own 60 shares; and Tennenbaum holds 102.
The sale is subject to court approval. In court documents, Radnor reported $362 million in assets and $325 million in debts. The firm has $103 million in debtor-in-possession financing from National City Business Credit and Silver Point Finance LLC.
The filing includes WinCup and Fort Worth, Texas-based StyroChem, which makes cup-grade EPS for lost foam casting, and shape and block molding. It does not include Radnor's operations in Canada, Finland or Poland.
In the filings, Radnor blamed high debt resulting from operational decisions and uncontrollable circumstances such as escalating energy and resin costs. The firm also invested substantially in new product development but did not recoup adequate returns.
``Specifically during 2005 and 2006, the debtors launched certain new products in response to customer requirements and an effort to improve profitability,'' Chief Financial Officer Paul Ridder said in an affidavit. ``Although the new product launches were successful and the debtors obtained valuable customer contracts as a result, the debtors made significant expenditures related to the new products, including investments in equipment and research.''
Standard & Poor's lowered its senior unsecured rating on Radnor to D from C on the news of the bankruptcy filing. S&P said Radnor's liquidity levels and cash-flow generation have been very strained relative to the size of the firm's interest payout and operational and capital expenditure requirements.
New product development was related to programs with McDonald's and renewed focus on niche segments like gas stations and convenience stores, said an industry source who spoke anonymously.
Foam was projected to be growing for Radnor, but paper is gaining more panache in the world of coffee consumption when it comes to players like Starbucks.
``Even with those new products, [Radnor hasn't] been able to make money. Their strategy was to go after more and more niche markets,'' the source said. ``It sounded like a neat strategy. They were on a course of action in a very methodical way and they ran out of time. While they did do some rationalization, they hoped to fill up those plants and now they have more work to do along the rationalization lines.''
Earlier this year, Radnor consolidated its Jacksonville, Fla., operation into other plants and announced a 10 percent worker lay- off. Ridder said in court documents that the firm made strides in improving manufacturing efficiency and cutting nonoperating costs, but liquidity still suffered.