(March 23, 2009) — Milacron Inc. faces the biggest challenge in its 125-year-old history — not only coming back from a Chapter 11 bankruptcy filing March 11, but also doing it during these unsettling economic times.
Chapter 11 allows a company to reorganize, under court protection from debts, while continuing to operate and preserve jobs and, for a stalwart machinery manufacturer like Milacron, a considerable stable of technical talent. At some point, the company can emerge from bankruptcy.
When can Milacron come out of Chapter 11? So far, in the early stages, executives aren't saying much. That includes Dave Lawrence, who was promoted from head of Milacron's D-M-E mold-bases business to become president and chief executive officer Dec. 1. He has only been in the top spot just over three months.
As of the middle of last week, Lawrence had granted only brief interviews with the press. He stressed that Milacron will survive and be a stronger company, and that customers and suppliers have been supportive.
A sale that would bring in new money could fall into place pretty quickly. In court documents, Milacron officials said they expect to complete a purchase agreement no later than April 9 to Avenue Capital Group and DDJ Capital Management LLC. Milacron also has received a new credit line from General Electric Capital Corp. Both sources of money come through debtor-in-possession financing.
What will Milacron look like in the future? Will the company exit any businesses? Lawrence and other company leaders are working on a new strategic plan.
Court documents give a lot of details about Milacron's financial troubles — the firm has not made a profit since 2000. The recession slammed sales and orders, which reduced Milacron's ability to borrow under its asset-based line of credit from GE Capital, money used to fund operations. “By the end of February 2009, Milacron faced a severe liquidity crisis,” the company said in court papers.
Milacron, founded in 1884 as Cincinnati Screw and Tap Co., certainly has adapted to changing economic conditions before. The machine-tool builder got into plastics equipment in 1968. Thirty years later, in 1998, the company made a bold move to sell its machine tools business to concentrate on plastics machinery.
Five years ago, Milacron managed to avoid a potential bankruptcy when bonds came due, and issued new bonds convertible to stock, which brought in new ownership. Through it all, the company's employees have performed with resilience and dedication.
Now workers, customers and suppliers are hoping that Milacron will survive to fight another day. As the largest U.S. plastics machinery maker, Milacron's health is important to U.S. plastics manufacturing. The firm has made solid moves to become more global.
Chapter 11 brings plenty of risks. More things are out of the control of management and the board of directors, as a judge or trustee makes many of the decisions.
Perhaps the most important question is this: Will customers shy away from buying Milacron machines during Chapter 11? It's important to remember that the company continues to operate and has pledged to continue to meet the needs of customers.
Company leaders need to share their strategy and long-term vision for Milacron as soon as the plans are finalized.