Injection molder Duraco Products Inc. is being liquidated after one of its creditors called for U.S. Bankruptcy Court in Chicago to change the firm's status to Chapter 7 from Chapter 11 protection because it was administratively insolvent and unable to reorganize.
Duraco, based in Streamwood, Ill., was best known for molding lawn and garden furniture. It entered Chapter 11 protection in November 2008, one day after its landlord, Stag III Streamwood LLC part of Stag Capital Partners of Boston said it would force the company to vacate the property for failure to pay back rent.
Duraco made arrangements under court protection to pay its rent, Stag attorneys said in court filings, but problems persisted with getting regular payments. In April, the court ordered the molder to pay $45,000 per week to Stag. But Stag noted in a Feb. 5 filing that between June 1 and Dec. 31, Duraco made six of 31 payments and only one of those was for the full amount. Duraco then signed a new lease that required it to make payments in early January, but Stag said it failed to meet that deadline.
By Feb. 9, when Stag petitioned the court to convert Duraco's filing to Chapter 7 liquidation, the company owed its landlords more than $2 million.
Holding company US Composites & Plastic LLC of Chicago acquired Duraco in 2007, which had been employee owned. Duraco employed about 100 at the time.
Duraco signed a lease for its 500,000-square-foot facility in February 2007, according to court documents. Stag first notified the company for lack-of-payment problems in December 2007, and in April 2008 began the process to seek an eviction notice.
Duraco continued to operate under court protection, but had problems creating the court-required reorganization plan necessary to begin emerging from bankruptcy. On Dec. 30, the firm filed its seventh request for an extension, noting that it had a financing shortfall when it switched its financial backing from Franklin Capital Corp. of Salt Lake City to Bibby Financial Services Inc. of Chicago.
It took a month to finalize the closing documents and close on the replacement financing, Duraco attorneys noted in the firm's request for an extension. In the meantime [Duraco] was operating with minimal, if any, financing from Franklin. Accordingly, during that time period, the debtor had become delinquent on some of its administrative expenses.
Those expenses included payments for equipment, utilities, insurance, trucking and other fees.
The Chicago Workers Collaborative is working with Duraco workers, who say they are owed back wages.
Stag claimed in its Feb. 5 filing that Duraco violated its latest contract in early January and that it owed more than $2 million in back rent. By Feb. 9, Stag was calling for the change to Chapter 7.
There cannot be any reasonable likelihood of rehabilitation, given that [Duraco] lacks the cash needed to continue to run its business, Stag stated in court documents. Even though Bibby perhaps is providing funding at this time, [Duraco] evidently lacks funds to pay the rent.
Stag also doubted Duraco's ability to emerge from bankruptcy.
As a practical matter, no plan of reorganization can be confirmed if one is ever proposed without the consent of Stag to the plan Stag now has concluded that [Duraco's] continuing pattern of delay and failure to timely pay all amounts due and owing to Stag will never be reversed. Accordingly, Stag will oppose any plan of reorganization.
Bankruptcy Judge Eugene Wedoff signed the conversion to Chapter 7 on Feb. 17, noting there were no formal objections filed.
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