In a move it says will help it reorganize its operations to make them fitter for the future, Milacron Inc. elected to voluntarily file for Chapter 11 bankruptcy protection in the Southern District of Ohio in Cincinnati and an ancillary proceeding in Canada. The filing should not affect Milacron’s operations outside of the U.S. and Canada, and the company plans to continue operations as normal. “The message we’re delivering (to employees, customers and other stakeholders) is we’re still here, and we’ll be here to fight another day,” said Dave Lawrence, Milacron president and chief executive officer, in a telephone call with MPW. Employees’ pay and benefits continues as normal, as does the company’s work for its customers, he said. Lawrence took over at Milacron with the retirement late last year of former CEO Ron Brown.
|Milacron’s Dave Lawrence emphasized that the company’s employees and customers will be taken care of during the reorganization.|
Milacron manufactures plastics processing machinery – injection and blowmolding machines plus extruders for sheet, pipe and profile, and structural foam molding units. Its D-M-E business unit makes and markets mold tooling and supplies for moldmaking, and it also has an industrial fluids business.
Last October, Glencore Finance AG sold its controlling interest in Milacron to private equity firm, Bayside Capital, which resulted in a large fourth-quarter charge. The overall loss also included fees of $7.4 million associated with restructuring as Milacron wound down what it called small manufacturing sites in North America and Europe, respectively, as part of its efforts to match the size of its business with the new demand realities of developed markets.
Along with its Chapter 11 filing, the company also has reached an agreement in principle with Avenue Capital Group and DDJ Capital Management LLC, which together hold approximately 78% of the company’s 11½% Senior Notes, in connection with a financial restructuring of the company. The proposed restructuring includes a commitment by Avenue Capital and DDJ to enter into an $80 million debtor in possession (DIP) term loan facility, which will provide Milacron with $40 million in new funds. Debtor-in-possession financing is provided to companies in financial distress or in Chapter 11 bankruptcy as a means to help fund ongoing operations during restructuring. Usually, DIP financing is more senior than debt, equity, and any other securities issued by a company.
In addition to the $80 million DIP facility with Avenue Capital and DDJ, Milacron has received a $55 million DIP revolving credit facility from General Electric Capital Corporation, which replaces the company’s pre-petition revolver. Availability under the new revolver is subject to a borrowing base formula. These DIP facilities are subject to approval by the bankruptcy court.
Lawrence compared Chapter 11 to a cold or flu: “You want to get over it as swiftly as possible.” While he has set an internal timeline for the company to emerge from bankruptcy, ultimately the bankruptcy court will decide the pacing, he said.
The restructuring also could bring new ownership to Milacron. Avenue Capital and DDJ, potentially with other Milacron bondholders, would have the option to purchase “substantially all of the company’s assets.” In return for these assets, the agreement contemplates that, among other things, the participating noteholders would repay the full debtor-in-possession loan, including a new revolver, assume certain of the company’s ordinary course liabilities, and provide additional consideration to those noteholders who do not participate in the acquisition.
Milacron says that, despite its efforts at cost reduction and its ongoing capacity rationalization, severely reduced sales and orders in recent months have impacted its liquidity to the point that the Chapter 11 filing proved its best course of action.
The potential purchase agreement is subject to certain conditions, including execution and delivery of a mutually satisfactory definitive asset purchase agreement as well as bankruptcy court approval. Upon execution of a definitive purchase agreement, Milacron will solicit competing bids from other potential purchasers and conduct a sales process approved by the bankruptcy court. Milacron’s assets would be sold to the bidder submitting the highest and best offer. —[email protected]