Plastics housewares molder Katy Industries Inc. has an agreed-on buyer but is open to other bidders while it reorganizes under Chapter 11 bankruptcy protection.
Katy announced May 14 that Highview Capital LLC and affiliates of Victory Park Capital Advisors have agreed to buy substantially all of Katy's assets. Through Section 363 of the U.S. Bankruptcy Code, Katy will file a motion to start bidding procedures for other companies interested in buying the assets.
Katy expects to complete a sale of its business within 60 to 90 days. Lincoln International LLC is conducting the sale process and is looking for higher or better offers for the business as a whole or as component parts.
Highview and Victory Park have committed up to $7.5 million in debtor-in-possession financing to keep St. Louis, -based Katy operating while it restructures.
In September 2016, Victory Park bought KKTY Holding Co., which held 1.13 million shares of Katy convertible preferred stock, for $6.5 million. Another 7.9 million shares were outstanding after the deal.
“Our goal is to put the company on the proper financial footing, de-lever our balance sheet, and use the influx of new financing to recover the business and position our operations for future growth while, at the same time, providing a mechanism to address the liquidity constraints and legacy liabilities that have impacted our ability to operate efficiently and effectively,” noted Katy President and CEO Robert Guerra in a news release.
Katy has four major business units:
• Continental Commercial Products of Jefferson City, Mo., manufactures and distributes janitorial and food service equipment and supplies.
• Wilen, also in Jefferson City, makes and distributes mops, brooms and brushes.
• Contico of Jefferson City makes and distributes plastic consumer storage and home products.
• Fort Wayne Plastics of Fort Wayne, Ind., is a structural foam molder and injection molder of plastic products and textiles. Its other manufacturing locations are in Jefferson City and Tiffin, Ohio.
Katy noted in a March 31 SEC filing that it had not completed financial statements for the year ended Dec. 31 2016 but the results for that year would be different than its 2015 financials.
“Among the reasons for such anticipated differences are the operational inefficiencies related to the move of one of the company's manufacturing facilities,” Katy stated in the 10K filing.
In 2015, Katy moved its Continental Commercial Products manufacturing facility from Bridgeton, Mo., to Jefferson City, according to information on Katy's website.
Katy further stated in its 10K filing that the results for the quarter ended Dec. 31 “to be substantially similar” to results of operations for the previous three quarters it reported in 10Q filings.
For the quarter ended Sept. 30, Katy reported a 22 percent drop in sales to about $24 million. Its loss in the period stretched to $5.4 million from a $1.6 million loss a year earlier.
Katy expanded through acquisition in the past several years. In 2015 it acquired the plastic shelving and cabinet business unit of Centrex Plastics LLC in Tiffin, Ohio. In 2014 Katy's Continental Commercial Products unit bought Fort Wayne Plastics Inc.
In November Katy hired Guerra as president and CEO to replace David Feldman. Guerra had more than 30 years of experience in industrial manufacturing management.
“We have full confidence that he will bring the critical insight needed to drive Katy's success and lead us in achieving the goals we have set for the company,” stated Victory Capital Park Chairman and partner Charles Asfour in a news release announcing Guerra's appointment.
Katy was founded in 1967 from predecessor companies that had been in business as long as 80 years. Its name was derived from the Missouri-Kansas-Texas Railroad — once commonly referred to as “the K-T” or “the Katy” — one of the original businesses. Katy sold the railroad in 1988.