In December of 2010, the Official Committee of Unsecured Creditors (the “Committee”), in the Precision Parts International (“PPI”) bankruptcy commenced several avoidance actions against various creditors of PPI. As reflected in the Committee’s complaints, on November 12, 2010, the Delaware Bankruptcy Court entered an order granting the Committee derivative standing to prosecute avoidance actions on behalf of the PPI bankruptcy estate. This post will look briefly at the nature of PPI’s business, why the company filed for bankruptcy and provide information relevant to avoidance actions.
PPI filed for bankruptcy in Delaware on December 12, 2008. As stated in the Declaration in Support of PPI’s First Day Motions, at the time it filed for bankruptcy, PPI designed and manufactured metal stamping in a process known as “fineblanking.” In addition to the automotive market, PPI sold its products to the construction, agriculture and lawn and garden industries. Based in Rochester Hills, Michigan, PPI operated six manufacturing facilities in North America. Read the PPI petition for bankruptcy here.
Why PPI Filed for Bankruptcy
PPI’s success was tied, in large part, to the U.S. auto industry. Almost 40% of PPI’s revenue in 2007 came from sales to manufacturers in the automotive industry. Lower volume in the auto industry, combined with higher steel prices, reduced PPI’s revenue and cash flow, which in turn led to bankruptcy. As reported in the media, PPI sold most of its assets to Cerion LLC in 2009. Cerion is a privately held manufacturing firm located in Michigan.