Pallet molder Solplast Inc. plans to file a restructuring plan while it is under protection from creditors.
The Montreal firm filed a Notice of Intention to File a Proposal on Jan. 6. The notice is roughly equivalent to Chapter 7 of the U.S. Bankruptcy Code.
Affiliate Polychem Products Ltd., a major polyethylene and polypropylene recycler in St.-Jean-sur-Richelieu, Quebec, also has filed for protection.
Solplast continues to operate and plans to run its plant, which injection molds pallets, at a high rate, according to Phillip Manel, an account executive with business advisory and consulting firm RSM Richter Inc., in Montreal. Manel said he expects Solplast will file a restructuring plan in early February. Solplast shareholders also plan to provide additional capital to the company to help it turn around, he said in a telephone interview.
Polychem also plans to resume production after reorganizing, Manel said.
Officials at Solplast and Polychem declined comment.
Solplast's working capital recently went from a positive position to a deficiency, Solplast President John Brown said in a Jan. 8 letter to creditors.
Brown cited several factors in Solplast's financial demise, including the increase in the price of mixed and clear bottles and the drop in virgin resin prices, and the rising value of the U.S. dollar.
Large lots of virgin resin are being sold at, or below, Solplast and Polychem's processing costs. Low prices being paid to municipal recycling facilities have threatened their abilities to separate waste-plastic streams.
``We believe that these factors must at some point correct themselves, and that our industry will recover,'' Brown said in the letter. ``Meanwhile, we have instituted a major cost reduction program in the plant.''