Blue Wolf Capital Partners LLC is poised to take ownership of Massachusetts-based Gloucester Engineering Co. out of bankruptcy. But over in Vienna, a court battle pits the deep-pocketed New York private equity firm against a small maker of film winders in Rapperswill, Switzerland: Swiss Winding Inventing AG.
The prize: ownership of the business and intellectual property of Gloucester's insolvent subsidiary in Vienna, Gloucester Engineering Europe GmbH.
Blue Wolf partner Michael Ranson said his firm will pull out all the stops to get the Austrian operation, which it wants to continue running to serve customers in Europe.
We don't want the IP to fall into the hands of the competitors. But we also want the European market to know that Gloucester is going to continue to be active, do business and have a commitment to that market, he said.
The case is playing out in bankruptcy court in Vienna. The intellectual property includes technical drawings, customer lists and parts lists.
On Sept. 1, creditors of Gloucester Engineering Europe voted to accept a settlement offer from the Gloucester, Mass.-based parent company to pay 30 percent of the money owed them, or about 360,000 euros ($503,000).
Ranson said 95 percent of the creditors approved the Gloucester Engineering offer all but two creditors.
But Swiss Winding filed an appeal Sept. 15. Its chairman is Carlos Martinez, who founded film winding equipment maker Wintech Winding Technology in the 1990s.
Martinez said he is prepared to pay up to 1 million euros ($1.4 million) for assets of Gloucester Engineering Europe, an amount that would settle creditors' claims in full.
Ranson called the million-euro offer irrelevant because Gloucester had already reached a settlement with the creditors. Also, Swiss Winding's offer was nowhere near that amount when it had the chance to buy the assets.
Swiss Winding has hired five laid-off employees of the Austrian business to service the Gloucester equipment in Europe. Martinez has said he wants parts lists and drawings to handle service and spare parts.
He claims Swiss Winding, a creditor owed less than 2,000 euros (about $2,800), has a right to appeal the settlement.
Ranson, however, said, We think their claim is false.
Raoul Wagner, the court-appointed trustee for Gloucester Engineering Europe, said the dispute could be ended if the U.S. parent would agree to pay 100 percent of the money owed to creditors.
Ranson said that's not the point.
They're saying it's about money and it's not about money, Ranson said. The appeal is really limited to whether the settlement discussions were conducted in accordance to the law.
Austrian authorities raised questions about how officials of the U.S. parent moved funds out of the Austrian business to the United States. Austrian Capital Maintenance Rules say that only profit, not assets, can be taken out of a limited liability company, known there as a GmbH. U.S. officials of Gloucester have denied that they took assets out.
In the latest chapter, Wagner said that, on Oct. 13, the Vienna court published notice that Swiss Winding has appealed. That triggers a 14-day period for opponents to answer the appeal.
Ranson said that even if the Austrian court ends up accepting Swiss Winding's standing to make an appeal, Gloucester Engineering and Blue Wolf will keep battling, by filing a separate lawsuit in another court on the intellectual property issue.
Gloucester has the financial resources to litigate this forever and we're not going to back down, Ranson said.