American Safety Razor Company (“ASR”), one of the largest manufacturers of shaving razors and blades, filed for bankruptcy protection in Delaware on July 28, 2010. According to the Declaration of ASR’s Chief Financial Officer, Andrew Bolt (the “Bolt Declaration“), the company’s net sales for 2009 totaled $330 million, down from the $351 million in sales achieved in 2008. See Bolt Declaration, pgh. 11.
Events Leading to Bankruptcy
Over 90% of ASR’s earnings come from the sale of wet shave razors. ASR markets its razors to retailers as a “value-priced alternative to more heavily advertised premium priced brands.” Bolt Dec., pgh. 13. The company sells its razors under the trade names “Personna,” “Matrix,” “Magnum,” “Mystique,” “Solara” and “GEM.” Id.
In 2008, ASR’s earnings began to decline due in part to competitors and retailers dropping their prices. The company’s primary competitors, Gillette (owned by Procter & Gamble) and Schick (owned by Energizer) recently began focusing more on the “value segment” of the wet razor market. Aside from increased competition, ASR also attributes its earnings decline to slower than expected growth in both Europe and in the industrial razor market in general. Bolt Dec., pgh 24. ASR’s economic situation went from bad to worse in 2010, when its largest customer discontinued selling ASR’s razors.
Objectives in Bankruptcy
In late December of 2009, ASR advised its lenders that it was in default of various loan agreements. The defaults arose from the company’s failure to satisfy certain debt ratio requirements. While in negotiations with its lenders, ASR received several inquiries from its larger customers regarding ASR’s ability to meet future operational and financial obligations. Through bankruptcy, ASR hopes to stabilize its finances and reassure customers that it can meet its obligations.
While in bankruptcy, ASR intends to conduct a sale of assets under section 363 of the Bankruptcy Code (permitting the sale of assets free of any interests in the assets). The company has already executed an asset purchase agreement with certain lenders. This agreement will serve as a floor for higher and better offers while in bankruptcy.
ASR’s bankruptcy proceeding is before the Honorable Mary F. Walrath, a former Chief Judge of the United States Bankruptcy Court for the District of Delaware. A copy of ASR’s Petition for Bankruptcy is available here. Drinker Biddle & Reath LLP serve as ASR’s bankruptcy counsel in this proceeding.