Barzel Industries, the Massachusetts-based metal manufacturer, filed for bankruptcy on September 14, 2009, in the United States Bankruptcy Court for the District of Delaware. One of the initial documents Barzel filed with the Bankruptcy Court is a Declaration in Support of First Day Pleadings (the “Declaration”). According to the Declaration, as of the petition date Barzel has 600 employees working at 15 different manufacturing and distribution facilities in the U.S. and Canada.
Events Leading to Bankruptcy
According to the Declaration, Barzel’s bankruptcy was the result of operating losses that began in 2008 and continued in to 2009. Barzel ties its losses directly to the “current global economic recession and credit crisis, and the resulting dramatic downturn in the automotive, transportation, manufacturing and construction industries in the United States and Canada.” These industries account for much of Barzel’s business. Barzel’s problems worsened following a drop in the price of steel. With prices and demand both down, Barzel sought to reduce expenses and improve its operations by closing 6 facilities and reducing its workforce by 350 employees.
Barzel’s cost-cutting measures were not enough and in May of this year, the company missed an interest payment due on its Senior Secured Notes, two-thirds of which are held by JPMorgan Chase. With few options remaining, Barzel began looking for potential purchasers of the company. As a result of its marketing efforts, 72 parties executed confidentiality agreements and 12 made offers to pursue a purchase transaction.
On September 14, 2009, Barzel entered into an asset purchase agreement with Chriscott USA Inc. and 4513614 Canada. Under the APA, Barzel will sell substantially all of its assets for $65 million unless a better offer comes about through the bankruptcy auction process. Barzel’s lenders have agreed to finance its bankruptcy proceeding through December 11, 2009, while Barzel completes the auction process.
According to Barzel’s Bankruptcy Petition, its assets total $365 million against debts totaling $384 million. This bankruptcy is before the Honorable Christopher S. Sontchi.