Compounder and recycler Michael Day Enterprises Inc. has filed for Chapter 11 bankruptcy protection and expects to be sold to Italy's Radici Group for $5.7 million, unless another buyer comes forward in the next 60 days.
Wadsworth, Ohio-based MDE made the filing Nov. 10 in U.S. Bankruptcy Court in Akron. The firm cited assets and liabilities each valued at between $10 million and $50 million.
In a Nov. 11 news release, MDE President Michael Cain said the firm has been negatively impacted by the recession, the accompanying downturn in our major markets and the tightening of credit markets.
This has made it increasingly difficult for us to obtain the capital needed to support our customers, he said, adding that the firm will continue to operate during the bankruptcy process.
In the bankruptcy filing, MDE officials said customer orders began to increase recently, but because of the firm's limited cash availability, it could not fill requested orders.
In a Nov. 12 telephone interview, Cain said that in his 30 years of working with the automotive sector, he has never seen the market stop so quick and then start so quick.
Our business has strengthened now it's a question of whether it can be sustained by the economy, he added.
Cain also said MDE which compounds and recycles a variety of engineering resins including nylon, polycarbonate and ABS has done a lot of heavy lifting in the last 18 months to preserve the company and continue to supply its customers.
We've located a strategic buyer and have a signed agreement, he said. And we also have support and funding from our bank.
MDE employs 84 and posted sales of almost $44 million in its fiscal 2009, which ended Sept. 30. Most of the firm's sales come from the automotive sector, which has been pummeled by a downturn in auto sales and by the bankruptcies of General Motors and Chrysler. The general instability of the automobile industry has directly harmed [the company's] liquidity, officials said in the filing.
The firm also was affected by a 2007 investment in its reclaim operations, which included the purchase of new grinding equipment.
MDE had employed 135 as recently as 2005, but reduced the size of its workforce in an attempt to cut costs.
Radici Group of Bergamo, Italy, makes plastics, chemicals and fibers and has annual sales of $1.8 billion. Radici has worked with MDE as a supplier at various points over MDE's history, Cain said.
Radici's plastics business had operated its own North American compounding plant in Blacksburg, S.C., until closing it in 2007 because of declining sales in the region. In late 2007, Radici marketing and technical service director Giovanni Pioltini told Plastics News that Radici is not giving up on the North American market, and would serve the region via imports and distribution.
Radici continues to operate a plant making polymer-based Spandex synthetic fibers in Gastonia, N.C. Company officials in Gastonia could not be reached for comment.
MDE is owned by plastics veteran Michael Day, who founded the firm in nearby Fairlawn in 1981. Prior to starting his own firm, Day worked for plastics and chemicals firms Celanese Corp. and A. Schulman Inc.
Cain has handled the firm's day-to-day operations since 2005. According to a court filing, MDE's largest unsecured creditors include Huntington National Bank ($585,000), recycler Technoplas Inc. ($587,000), and resin distributors JM Polymers ($536,000) and Monster Polymers Inc. ($323,000).
Polymer Transaction Advisors Inc. of Newbury, Ohio, has served as MDE's financial adviser on the proposed deal.
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