Lincolnshire steel-tube company files for bankruptcy
RathGibson Inc., the steel-tube maker controlled by DLJ Merchant Banking Partners, filed for bankruptcy with a reorganization plan backed by lenders.
The company today listed assets of more than $305 million and debt of $319 million in U.S. Bankruptcy Court in Wilmington, Delaware. It said it has as many as 5,000 creditors.
Lincolnshire-based RathGibson negotiated a reorganization plan with lenders who own 73 percent of the company's $200 million in senior notes, Chief Financial Officer Jon Smith said in court papers. Under the plan, the noteholders would receive the majority of the company's stock, Smith said.
"In light of the overwhelming support of the plan, the debtors hope to be able to quickly file and confirm the plan and emerge from Chapter 11," Smith said in court papers.
The company will seek court approval to borrow up to $80 million from affiliates of Wayzata Investment Partners LLC, Eaton Vance Corp, and BlackRock Inc., to help fund operations during its bankruptcy, according to court documents.
The company was forced to seek protection from creditors after demand for its products fell and its bank cut off access to a credit line, causing a cash crisis, Smith said in court filings. RathGibson was in danger of default on $55.3 million line of credit and had its credit rating cut in May and June.
RathGibson was formed in 1999 when Rath Manufacturing Company Holdings Inc. merged with Gibson Tube Co., according to court papers.
In 2007, DLJ Merchant Banking Partners bought the company from a unit of Castle Harlan Partners IV LP. DLJ is a unit of Credit Suisse Group AG.
RathGibson employs more than 500 people at three factories in Wisconsin, New Jersey and Arkansas and a warehouse in Lousiana.
The company's products are used by companies such as Exxon Mobil Corp, Royal Dutch Shell Plc, Dupont Co. and Monsanto Co.
The noteholders, represented by their trustee, Bank of New York, were listed as the biggest unsecured creditor. The balance on the notes as of July 13 was $209.2 million, according to court records.