Gloucester Engineering Corp. files Chapter 11

The manufacturer of blown- and cast-film extrusion lines hopes the move will enable it to reorganize and return to profitability. The situation is certainly difficult as one of the recession's lasting effects has been even more aggressive pricing among suppliers bidding for processors' business.   

The bankruptcy filing at the company, based in Gloucester, MA, is the latest in a string of moves to balance income with expenses. Last year about ¼ of the workforce was let go, bringing it below 200 employees, but even that proved too little to avoid Ch. 11. 

The voluntarily filing for reorganization under Chapter 11 of the bankruptcy code was made in the District of Massachusetts. Blue Wolf, an affiliate of equity investor Blue Wolf Capital Fund II L.P., is providing Gloucester with a $6 million debtor-in-possession facility, pending court approval, which is to be used to fund the company's operations as it restructures and allow it to continue accepting and processing customer orders. Additional financial details were not disclosed. A 'debtor-in-possession' is a company operating while under the Chapter 11 bankruptcy process; a debtor-in-possession financing typically has priority for repayment over existing debt, equity and other claims.

A statement from stated, "Blue Wolf is excited to continue providing working capital to Gloucester Engineering, which has ample liquidity to continue operations." Blue Wolf first extended an unannounced amount of credit to the company in May, and says Gloucester's orders intake have improved since. GEC has more than 1200 lines installed around the world. Manufacturing is in Gloucester and, since 2009, in India as part of a joint venture with Kabra.  

Also in a statement, Carl Johnson, president of GEC, said, "Working closely with our advisors, we decided that filing for Chapter 11 reorganization was in the best interest of our customers, vendors, creditors, and employees. The bankruptcy filing will not hinder our ability to accept or process new or existing orders and we are confident that Blue Wolf's ongoing financial support will allow GEC to continue operating as we execute our turnaround plan and return to profitability. We anticipate that there will be no disruption to our customers."

Johnson added, "GEC's turnaround plan, which was initiated several months ago, is achieving the desired results, and we regret that a handful of creditors have nevertheless influenced this turn of events." He refers to three of the company's creditors that in April filed an Involuntary Chapter 7 petition against GEC, demanding money they say are were owed. Chapter 7 bankruptcy usually ends with a company being liquidated, whereas Chapter 11 allows for continued operations with the goal to for a company to regain its financial independence.

In late 2007 German metals-processing equipment manufacturer SMS (Düsseldorf) sold the then-named Battenfeld Gloucester to a group of senior managers plus two private investors, John Sharood and Dick Murphy, who counted the company as a longstanding customer from their previous venture, EGS Gauging, a maker of web measurement and controls equipment. At the time of the acquisition, the extruder manufacturer had annual sales of about $100 million and 300 employees.