Last updated on May 11th, 2020 at 01:35 pm
Nashotah-based manufacturer Techniplas LLC has filed for Chapter 11 bankruptcy, seeking to sell the company after a previous deal with a private equity firm was derailed by the emergence of the COVID-19 pandemic.
According to court documents, the maker of plastic components had $175 million in outstanding notes that were set to mature on May 1 and more than $17 million in borrowing due under a credit agreement.
The company said it reached an agreement with a group of its noteholders to provide almost $6.8 million in financing to serve as a liquidity bridge to the Chapter 11 filing, followed by an up to $30 million credit facility and up to a $125 million term facility as part of a debtor-in-possession financing package that would mature June 19.
“We are proud of the confidence represented by the agreement with our noteholders. This solution charts a positive path forward for the company, despite the challenges presented by the global COVID-19 pandemic,” said Ali El-Haj, chief executive officer of Techniplas.
Techniplas primarily makes parts for the automotive and transportation industries, including those used in fluid and air management, decoration, personalization and structural components. Non-automotive parts include power utility and electrical components and water filtration products.
The company had 721 employees when it filed for bankruptcy, plus another 190 employees let go just before the filing as the company began closing plants in Auburn, Alabama and Ankeny, Iowa.
Last year, Techniplas had $475 million in net sales, a drop of 10.2% from 2018. It’s Wisconsin and Iowa operations did see a combined sales increase of $2.6 million or 3.6%. The company had a net loss of $21 million in 2019.
The company acquired Dickten Masch Plastics in 2010 and then expanded with other acquisitions including Nyloncraft Inc. in 2012, a production facility of NYX Inc. in 2013, Weidmann Plastics in 2014 and Vallotech in 2015.
Around 90% of the equity in Techniplas is owned by DM Plastics Partners LLC, which is ultimately owned by George Votis. The remaining 10% is owned by a Votis family trust.
With looming debt maturities, Techniplas began exploring strategic alternatives in 2017. Those alternatives included a sale process that in one case reached late stage negotiations but did not end in a deal.
In 2018, the company explored refinancing the debt along with a potential public equity listing in London. Those efforts were hampered by a cyclical downturn in the automotive industry and uncertainty from Brexit, according to court documents.
In 2019, Techniplas began discussions with its noteholders and New York-based private equity firm The Jordan Company. Those talks led to one of Techniplas’ European subsidiaries selling a Jordan affiliate a 10% note due in October 2020. The proceeds were used to pay interest on the company’s existing notes.
The deal also installed El-Haj as chief executive officer and gave Jordan an opportunity to acquire the company. Jordan didn’t exercise that right because it could not secure financing for the notes and other debts.
Techniplas did enter into enter into negotiations with Jordan and a group of noteholders that led to an agreement in principle by mid-February. The deal called for Jordan to acquire the company’s equity and a plan to restructure the existing debt.
Closing was targeted for March 2020, but the COVID-19 outbreak slowed demand for the company’s products. Techniplas was forced to shut down all but two of its plants and ultimately decided to permanently close the facilities in Alabama and Iowa.
The deal with Jordan stalled as the company’s business slowed and its liquidity position worsened. Jordan revised and then withdrew from the deal. It submitted another proposal on March 27 that was rejected by the noteholders.
Techniplas then turned to negotiations with the noteholders group, which led to the interim financing to reach bankruptcy court and debtor-in-possession financing.
The group also agreed to provide a $105 million stalking horse bid as part of the court sale process of the company as a going concern.
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