Industrial plastics recycler Nicos Polymer Group has filed for bankruptcy, but will continue to operate as it reorganizes under Chapter 11 bankruptcy rules.
In an affidavit filed with the U.S. Bankruptcy Court in New York, Nicos which was purchased three years ago by the investment group CrownBrook Debco LLC said it had debts, as of Oct. 13, of more than $22 million compared to an aggregate net book value of cash, accounts receivable, inventory, fixed assets and other assets that were just $4.3 million.
In the court filing, CrownBrook Debco which does business as Nicos Polymer said that it had encountered liquidity issues as a result of increased interest expenses in connection with its two major loans and that its sales had decreased precipitously during the economic downturn.
Falling oil prices made certain reprocessed plastic less competitive against virgin raw materials and the general economic downturn reduced the amount of industrial waste [that was] available to reprocess, said the company's affidavit.
The bankruptcy petition was filed with the court Oct. 13, one day before the company's primary lender and creditor, Fifth Street Mezzanine Partners II LP, was scheduled to sell all of the assets of the Nazareth, Pa., company. Fifth Street notified Nicos of that impending auction during what proved to be unsuccessful negotiations to restructure the loan.
Most of Nicos' debt is the 18.3 million owed to Fifth Street, which helped CrownBook Debco finance the acquisitions in 2007 of plastic recyclers Debco Plastics Inc. in Freeport, N.Y., and Nicos Polymers & Grinding Inc.
The court filing also listed assets of just under $22 million as of Oct. 4, and liabilities of nearly $24.6 million.
The bankruptcy at least temporarily puts a halt to the plan of Ron Schinik, managing partner of CrownBrook Depco, to build a mid-tier super-regional plastics recycling firm with $50 million to $75 mllion in sales by acquiring plastics recyclers in the Midwest and Southeast.
Schinik had co-founded CrownBook Capital LLC in New York four years ago with a plan to consolidate companies in what still remains a highly fragmented industry.
This is our entree to get a foundation company in the plastic recycling business, Schinik told Plastics News when CrownBrook acquired Debco in January 2007. We are going to take our time and be judicious, but I would think we can do another one or two acquisitions this year and then ramp it up next year and build a large recycling company.
After purchasing Debco, CrownBrook acquired Nicos six months later through CrownBrook Debco LLC, which it formed after the acquisition of Debco.
Nicos is the 20th-largest recycler on the PN rankings, based on pounds of material recycled annually, which the company said was 72 million pounds in 2009. At the time of their purchases by CrownBrook, Debco was recycling 7 million pounds of plastic annually and Nicos 90 million pounds.
The Debco operation was moved into the Nicos plant in Nazareth, Pa., during 2007.
Debco and Nicos had sales of $7.5 million and $13 million, respectively, before they were purchased by CrownBrook in 2007.
Kevin Cronin, CEO of Nicos Polymer Group, did not immediately return a phone call, inquiring about the bankruptcy.