Resin distributor and reseller Thornton & Co. Inc. has filed for bankruptcy, after having a plan to repay suppliers rejected by its primary bank.
Southington, Conn.-based Thornton — with annual sales of about $200 million — filed for Chapter 11 bankruptcy protection in Hartford, Conn., on Aug. 10, officials said.
“We have decided that the best way to try and repay our creditors as much money as possible is under bankruptcy protection,” company President J. Paul Thornton Jr. said in a news release. “We proposed a plan to our banking group, led by People's United Bank, which would have let us stay in business and recover from certain market events, but they rejected it."
People's United is based in Bridgeport, Conn. Thornton officials said their plan was rejected by People's and by its partner bank, Farmington Bank of Farmington, Conn.
“We were under very tight constraints from our bank,” Thornton Vice President Jake Thornton — Paul's son — said in an Aug. 12 phone interview. “We filed to protect ourselves from complete liquidation.
“We're going to fight through this and find a way through, one way or another,” he added.
In the filing, Thornton & Co. listed assets of between $10 million and $50 million, and a similar amount in liabilities. The firm's list of largest unsecured creditors reads like a Who's Who of the North American resin market.
Thornton & Co.'s largest single unsecured creditor is Formosa Plastics Corp. USA, which is owed almost $2.1 million. Westlake Chemical Corp. is owed more than $2.2 million through two separate units. Other top unsecured creditors include Equistar Chemicals LP, at more than $1.3 million, and Chevron Phillips Chemical Co. at just less than $1 million.
Thornton has retained Gordian Group LLC of New York as its financial adviser. Thornton's annual resin sales total more than 300 million pounds, mostly in prime and off-grade polyethylene and polypropylene.
Paul Thornton cited “a significant drop” in petrochemical prices in the last year as a reason for the bankruptcy filing. That drop caused his firm's sales to fall more than 20 percent, he added, leading Thornton to deal with the resulting financial pressure by selling inventory on hand “at a significant loss.
“We are filing this case to try and bring value to our suppliers who have so generously supported us and worked with us,” Paul Thornton explained. “If we do just as People's Bank asks, our suppliers will get nothing.”
Thornton “will now likely undertake at least a partial orderly liquidation,” officials added in the release.
Paul Thornton founded the firm in 1994. The firm had been on a growth curve in recent years, hiring several market veterans in early 2014 and embarking on a branding campaign.
In early 2014, Jake Thornton told Plastics News that the firm was looking to benefit from large PE resin capacity expansions that are set to come online in North American in the next few years.
Jake Thornton said Aug. 12 that his firm has been in touch with potential investors. He added that the firm plans to sell off some of its resin inventory.
“Our goal is to pay back our creditors as quickly as we can, and we have a plan to do that,” he explained. “We had a plan before the filing, but we didn't have time to execute it.”
A large drop in recent North American prices for polypropylene resin played a role in Thornton's financial issues. Prices for the material are down a net of 25 cents per pound since November, including drops of 10 cents each in December and January.
“We had too much polypropylene in-house, and banks don't like inventory at all,” Jake Thornton said. “But it was really a culmination of things. We made some managerial mistakes as well.”
He added that, in hindsight, Thornton & Co. should have worked with a larger bank than People's when the firm chose a new bank four years ago.
“We grew out of our bank relatively quickly,” Jake Thornton said. “We were a big fish in a small pond, and when that happens, the magnifying glass is on you. The bank wasn't willing to help us.”
Sources in the resin distribution market said that it will be challenging for Thornton & Co. to make it through the bankruptcy process intact.
“They might be able to survive in some way as a smaller broker, but they'd have to shrink down overhead to bare bones,” one distribution executive said of Thornton. “I'm stunned they could get hurt this bad. They must have really taken their eyes off the ball.
“We saw bigger price drops than this on polyethylene and polypropylene during the recession, and no resellers or distributors went out of business.”
“They're going to have a real struggle coming out of it,” another industry executive said of Thornton. “It's not like the [resin] majors need another reseller or prime distributor.”
Major North American resin makers in recent years have been reducing the number of distributors and resellers that they work with. But regional resin sales to those channels were up in the first half of 2015, according to the American Chemistry Council.
Sales of low density PE to distributors were up almost 40 percent in the first half, while distributors bought almost 15 percent more PP. On the resellers' side, sales of high density PE were up more than 35 percent, with sales of linear low density PE up almost 11 percent. PE totals are for the U.S. and Canada. PP totals include those countries as well as Mexico.