Blown and cast film machinery maker Gloucester Engineering Co. Inc. of Gloucester, Mass., is in talks with a private equity firm on a refinancing package for some of its unpaid debt.
The Gloucester Daily Times reported May 17 that the preliminary agreement with Blue Wolf Capital Fund of New York is not a sale and does not include any equity in Gloucester.
A source close to the negotiations said May 18 that a deal is in the works, but could not give details. Officials of Blue Wolf could not be reached for comment. Reached by telephone May 18, Gloucester Chairman John Sharood declined to comment.
Also on May 17 and 18, two Gloucester creditors and its insolvent European subsidiary filed in U.S. Bankruptcy Court in Boston to oppose settlements the firm has reached with two of its creditors.
Raoul Wagner, the bankruptcy trustee appointed for the subsidiary by the Austrian Commercial Court in Vienna, argued in his filing that the U.S. parent company illegally transferred about 608,000 euros ($753,000) from Gloucester Engineering Europe late in 2009 to pay its debts.
Wagner on May 7 lodged a complaint with Austrian prosecutors seeking criminal charges against Sharood for embezzlement, grossly negligent impairment of creditor interests and fraudulent bankruptcy offense, according to the bankruptcy court filing.
Wagner said money transfers left Gloucester Engineering Europe which has since been liquidated with only about 373,000 euros ($462,000) in its accounts against about 847,000 euros ($1.05 million) in debt.
Sharood had no comment on the allegations.
In March, three Gloucester creditors filed an involuntary Chapter 7 bankruptcy petition against the firm. Since then, two creditors Hub Technologies Inc. of Middleboro, Mass., and Plastifar SA of Santo Domingo, Dominican Republic reached an agreement with Gloucester and moved to dismiss the bankruptcy petition.
Attorneys for Hub and Plastifar argued that with Gloucester having more than $13 million in secured debt, unsecured creditors were unlikely to recover anything in liquidation.
In exchange for the creditors' moving for dismissal, Gloucester agreed to complete an order for machinery that had been partially paid for by Plastifar, but delivered to another company. For Hub, Gloucester agreed to make the company its exclusive vendor for cooling cans for one year.
Neither Hub, which claims it is owed $40,000 by Gloucester, nor Plastifar, which claimed $203,500 owed, would be paid any cash under the agreement.
THG Corp. of Northboro, Mass., which is owed about $68,000 by Gloucester, and National Metals Finishing Corp. Inc. of Springfield, Mass., which is owed about $173,000, objected to the deal on the grounds that it is unfair to other unsecured creditors.
In April, Gloucester asked for court permission to repay $1.76 million loaned by Silicon Valley Bank from two collateral-secured lines of credit opened in 2007. A hearing on the repayment is set for May 20. A hearing on the Chapter 7 petition dismissal is set for June 3.
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