Blow molding major Consolidated Container Co. LLC has agreed to buy a smaller rival, Shelburne Plastics Inc. of South Burlington, Vt., out of bankruptcy.
A condition of the purchase is approval by the U.S. Bankruptcy Court for the District of Vermont, the firms announced in an Oct. 21 news release. Atlanta-based CCC proposes to buy Shelburne's assets and certain liabilities for an undisclosed sum. Shelburne operating companies in Vermont, Maryland and New York are specified in the agreement.
Shelburne Chairman and CEO Gene Torvend stated in court documents that the company's troubles begin in the summer of 2010, when personal reasons led him to turn over financial and strategic decision-making authority to the firm's chief financial officer and chief operating officer. In March 2011, Shelburne hired a new controller who was unfamiliar with the plastics industry.
In 2011 and 2012 the executives made poor business decisions that drew substantial cash our of the business and led to escalating operating losses, Shelburne alleges in court documents. Losses for 2010, 2011 and 2012 were $118,000, $491,800 and $2.39 million, respectively.
The run-up in losses led to terminations of the three executives and the hiring of an experienced, qualified chief financial officer. Efforts to find new capital failed and Shelburne hired Harmonics Ltd. to find a strategic buyer.
By the end of September 2013, Shelburne reached a cash crunch when it exhausted its credit. In the absence of a buyer it appeared the company would have to shut down due to lack of operating cash. Shelburne voluntarily filed for Chapter 11 bankruptcy protection on Oct. 20.
CCC is a “stalking horse” bidder, according to the companies. The sale is designed to allow Shelburne plants to access strong operational and financial backing from CCC, they stated. CCC agreed to bid for Shelburne in a Section 363 sale process under Chapter 11 of the U.S. Bankruptcy Code. Shelburne hopes bankruptcy court will quickly approve the deal so that the sale can be completed in about 30 days.
“The sale and filing are necessary next steps to continue long term supply to Shelburne's customers,” noted Shelburne Chairman and CEO Gene Torvend in a news release. “We are grateful to our outstanding team of employees, partners and suppliers who have worked with us through this transition.”
“Shelburne has a very good reputation in the marketplace for service, quality and doing business the right way,” stated CCC President and CEO Jeffrey Greene.
Shelburne has four U.S. plants blow molding high density polyethylene, PET and polypropylene for food, water, juice, industrial and chemical markets. Its plants are in South Burlington; Londonderry, N.H.; Jessup, Md., and a factory in Monticello, N.Y., which it opened in 2010. Shelburne, established in 1974, employs more than 65, it said in its court filings.
Shelburne's biggest secured creditor is Centrix Bank & Trust, to which it owes about $3.6 million, collaterized by a lien on assets. Business Finance Authority of New Hampshire Inc. is owed about $674,000. The Internal Revenue Service has a lien on assets of $939,000. Unsecured creditors are owed more than $3 million. Major creditors include Allstar Dairy Association of Cincinnati, Ohio, which is owed $977,000, Dantrade BV of Schiphol, Netherlands, owed $1 million, and Centrix of Bedford, N.H., owed $3.6 million.
As of its filing date, Shelburne had no bankruptcy trustee or creditors' committee. Law firm Obuchowski & Emens-Butler PC of Bethel, Vt., is Shelburne's bankruptcy counsel.
CCC specializes in custom mid- and short-run rigid packaging production for dairy, household chemical, food, industrial, water and beverage markets. It runs 54 plants employing 2,200 workers in the United States. In late 2012 it expanded by acquiring bottle blow molder Madras Packaging LLC of Atlanta. Earlier that year it bought Roffe Container Inc.