Blackhawk Automotive Plastics Inc., which filed for Chapter 11 bankruptcy Oct. 22 to restructure its debt or find a new owner, now faces an auction of its assets.
Blackhawk and corporate parent Tier E Automotive Group Inc. - which was formed in 1999 to buy the automotive plastics business of Worthington Industries Inc. - asked Judge Kay Woods to approve the bidding process, in a Dec. 4 filing in U.S. Bankruptcy Court in Youngstown, Ohio. The firm wants to seek bids to ``purchase all or substantial portions'' of the Blackhawk assets ``as a going concern.''
The auction could take place by mid-March.
With a headquarters plant in Salem, Ohio, and another plant in Mason, Ohio, Blackhawk supplies auto parts such as louvered air vents, in-mold appliques and instrument panels. In court documents, the company said it employs 1,574 and generated $136 million in 2006 sales.
According to Plastics News' most recent ranking of injection molders, Blackhawk runs 140 injection pressses - but that included a third factory, in Upper Sandusky, Ohio, which has been closed. In 2005, Blackhawk sold its plant in Mississauga, Ontario, to customer Johnson Controls Inc. of Glendale, Wis.
In a Plastics News story published Oct. 29, Blackhawk Chief Executive Officer Cliff Croley said he expected the firm to make a quick exit from Chapter 11. He said Blackhawk got caught in a cash squeeze, as some suppliers began demanding faster payment. Two tentative refinancing deals fell through.
Croley did not return a telephone call for this story before deadline.
Two of Blackhawk's key customers, General Motors Corp. and Chrysler LLC, have suffered slowdowns, and both had short strikes this year. Chrysler of Auburn Hills, Mich., also experienced an unscheduled two-week shutdown at its assembly plant in Belvidere, Ill., an important customer for Blackhawk's parts.
Blackhawk has continued to deliver its interior and exterior car parts even as it has struggled financially.
Court documents in the Dec. 4 filing spell out some of the problems. Blackhawk financed its operating and capital expenditure needs through several sources of capital, including a secured credit line from a group of banks led by LaSalle Business Credit LLC. The plastics company owes the banks about $33 million.
In October and November of 2006, some suppliers began demanding to be paid in advance before they would deliver materials. As a result, ``cash flows suffered,'' requiring the company to seek advances from the banks - and the cash flow problems also caused Blackhawk to default on some of its loan covenants, according to the court filing.
In July and August of 2007, Blackhawk, the bank group, Key Equity and two major customers - General Motors and International Automotive Components Group North America Inc. - negotiated agreements to improve borrowing terms from the banks, and win some concessions from the two customers. Under the deal, GM and IAC were restricted from moving work out of Blackhawk and agreed to offset payments on future orders. But in the end, the debtors decided the best strategy would be to file Chapter 11 on Oct. 22, ``coupled with a viable, near-term exit strategy.''
The day after the filing, the bankruptcy court in Youngstown approved debtor-in-possession financing from the bank group and participating customers. As a condition, Blackhawk officials are required to market the company as a going concern.
On Nov. 30, Blackhawk retained an investment banker to seek bids and look for a ``stalking horse,'' or preferred bidder. But in the Dec. 4 filing, company officials said they had not lined up a bidder yet.
Blackhawk's customers include GM, Chrysler, Delphi Corp., Honda Motor Co., Navistar International Corp. and Visteon Corp., according to the court filing.
