On March 22, 2009, Metal components manufacturer Morton Industrial Group (“Morton” or “Debtors”) filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. The company began in 1963 as Mortan Metalcraft Co. in Morton, Illinois. By the time it filed for bankruptcy, Mortan grew to become one of the largest manufacturers of metal components used in backhoes, excavators, tractors, wheel loaders, power generators, turf care equipment and other industrial equipment. (Read Morton’s Affidavit in Support of First Day Motions here).
At the time it filed for bankruptcy, Morton employed 993 employees. The Debtors operate five manufacturing facilities: two in Illinois, two in North Carolina and one in Pennsylvania. Morton’s plants in Illinois generate over two-thirds of the company’s revenues. In 2008, Morton’s total revenues exceeded $200 million.
Events Leading to Bankruptcy
According to its Affidavit, Morton’s bankruptcy was the result of a culmination of events. On a macro level, the poor global economy and deteriorating credit markets resulted in signficant losses for Morton. The Debtors expect their sales in 2009 to drop by 40% compared to sales for 2008. Morton’s losses generated significant pressure from its lenders, vendors and creditors. Ultimately, Morton filed bankruptcy in order to address liquidity issues, restructure its businesses and conduct a sale of assets under section 363 of the Bankruptcy Code.
Immediately prior to filing for bankruptcy, Morton’s prepetition debt totaled over $78 million. Of this amount, $33 million consists of term loans and $27 million in subordinated notes. Morton’s trade debt totals $14.8 million. According to its bankruptcy petition, Morton’s ten largest trade creditors include:
- J.D. & Co. Steel … $3.9 million
- Feralloy Corp. … $723,000
- Ryerson … $527,000
- Caterpillar … $483,000
- Hagerty Steel … $345,000
- Praxair … $271,000
- Chicago Tube & Iron … $213,000
- Illinois Weld & Machine … $174,000
- Valspar Corporation … $140,000
- Arlington Metals Corp … $137,000
Morton hired AlixPartners to assist with its restructuring and raise capital. Alix has begun a process to market and sell Morton’s assets. In order to allow for a sale while in bankruptcy, Debtors plan to file a motion with the Bankruptcy Court in a couple of weeks approving bidding procedures for the sale of assets. In the interim, the Debtors intend to enter into an asset purchase agreement with a stalking horse bidder. (To read a prior post on this blog discussing issues relevant to stalking horse bidders, click here).
This bankruptcy proceeding is before the Honorable Brendan L. Shannon.