New York Wire Co. Files for Chapter 11 Bankruptcy
November 18, 2015
On Thursday, Oct. 8, New York Wire Co., the oldest wire weaving company in the U.S., announced that it had filed for Chapter 11 bankruptcy protection.
According to a Central Penn Business Journal report, the company cited problems with its start-up operations in China and a global economic downturn as key factors for seeking bankruptcy protection.
New York Wire Co. falls into debt
New York Wire Co. filed a Chapter 11 bankruptcy petition claiming that it became insolvent due to its accumulated debt. In its bankruptcy filings, the company stated that it held over $12.2 million in secured debt and $2 million in unsecured debt, with another $3.4 million in liabilities, according to the York Daily Record. The company’s 30 largest creditors include UGI Energy, PPL EnergyPlus, Met-Ed and the Borough of Hanover as well as raw materials providers and vendors in Canada and Italy.
The company’s Chinese start-up operations accumulate debt
In its bankruptcy documents, the New York Wire Co. noted that it launched Suzhou New York Wire Precision Inc. in China in 2012. The new manufacturing facility took longer to build than expected with production delays and high employee turnover, and thus proved to be a massive expense for the company. As a result, the company’s operating losses on the Chinese facility began to mount and its inventory control costs became exorbitant, sending the company into insolvency and massive debt with First Niagara Bank, N.A., one of its primary creditors.
The restructuring plan
In its court papers, New York Wire Co. hired Sandeep Gupta of Novo Advisors as its chief restructuring officer to oversee the company’s bankruptcy process. New York Wire Co. also stated that it will work with investment bankers to develop an asset sale auction.
Details of the sales process involve requesting approval from the bankruptcy court for the company’s proposed sale to NYW Acquisition LLC. NYW Acquisition will then serve as the stalking horse bidder of the auction where the expected bid will be between $7.3 million and $8.1 million. The sale is set to be completed by Dec. 3, but if no qualified bids are received by the company, it will proceed with its sale to NYW Acquisition. Further, the company also stated that it has requested any other suitor to offer a minimum bid of $8.55 million in cash, with a 10 percent good faith deposit made in the initial auction.
New York Wire Co. also seeks approximately $3.7 million in debtor-in-possession financing to prevent utility companies from discontinuing service to its locations and to continue compensating its employees. According to an ABF Journal report, the financing consists of $2.3 million in roll-up loans and $1.4 million in revolvers. This is particularly important for the company as it plans to emerge from the bankruptcy period as a viable business, and therefore does not plan to lay off any of its 238 employees in the U.S. or its 170 employees in China.