Foamex International Inc. has been granted permission by a federal bankruptcy court to use up to $20 million of a $95 million debtor-in-possession financing package as it restructures its balance sheet.
Media-based Foamex, which makes polyurethane foam-based products, voluntarily filed for Chapter 11 protection from creditors Feb. 18 in U.S. Bankruptcy Court in Wilmington, Del.
Foamex, which has been struggling with $380 million in debt amid the current economic downturn, did not make the payment on its loan due Jan. 21. This is the company's second time in Chapter 11; it took the same route in 2005 for similar reasons.
The maker of comfort and technical foams said in a Feb. 24 news release that it plans to restructure its debt to provide “a capital structure more suited to the conditions of today's market environment.” Day-to-day operations were to continue as normal, the company said.
Foamex expected to gain immediate liquidity to continue operating without interruption, strengthen its balance sheet and strengthen business performance, Jack Johnson, president and chief executive officer, said in the release.
“Like many companies around the world, Foamex has been hit by the economic downturn in the markets we serve,” Johnson said. Although it has cut its debt by about $240 million in the past two years, “we cannot support the existing heavy debt load in the current operating environment,” he added.
Foamex is continuing to invest in technology and market development, Johnson said, and expects to emerge from Chapter 11 as quickly as possible. The current filing does not include Foamex operations in Mexico, where the company operates three plants, or a joint venture in Shanghai.
As part of the company's first bankruptcy, Foamex in 2007 sold its 70 percent share in Foamex Asia Co. Ltd., a joint venture that operated facilities in Wuxi City, China; Thailand and Singapore.