Porter, White & Company completed the sale of the operating divisions of Schuler Industries, Inc. in 2001. Schuler was operating under the protection of Chapter 11 of the Bankruptcy Code when we were retained to sell two if its three operating divisions. Our efforts resulted in the continued employment of most of Schuler's workers and substantial recover of the amounts owed Schuler's senior lender.
Schuler Industries was rounded in the 1950's in Birmingham, Alabama. At the time we were hired, Schuler had three business units: (1) Schuler Steel Division, a steel fabrication company with a primary fabrication plant in Birmingham and a painting operation in Fort Payne, Alabama; (2) Carbon Products Division, a specialty graphite products company in Birmingham; and (3) Clean Earth Environmental Group, a manufacturer of waste collection vacuum trucks for the municipal and industrial markets.
Reorganization Plan: When we were retained, Schuler had filed a plan for reorganization providing for the sale of the Steel and Carbon Products Divisions, with net proceeds sufficient to satisfy Schuler's principal lender. The plan contemplated Schuler emerging from Chapter 11 retaining Clean Earth Environmental Group. It was anticipated that Clean Earth Environmental Group would produce cash flow sufficient to satisfy a portion of the unsecured creditor debt and would serve as the foundation for a rejuvenated company.
State Court Receivership: After approximately six months, it became clear that Schuler was failing to meet its Chapter 11 commitments to its lender and that a turnaround was unlikely. The lender then took the unusual step of obtaining the appointment of a receiver from the Circuit Court of Jefferson County. The receiver immediately retained Porter, White & Company to sell all of Schuler's remaining fixed assets, including those of Clean Earth Environmental Group.
Developing an appropriate marketing strategy for the Schuler assets was highly important. The poor operating performance of Schuler made sales to financial buyers at reasonable prices extremely unlikely. We sought industry buyers who could form their own opinion of the value of the operating divisions under new management. Most buyers believed they could add resources and do better with the businesses. Industry buyers brought synergistic value to the businesses, including sales contacts, advantageous purchasing arrangements, and proven management.
Potential buyers for the businesses were identified from a variety of sources, and included competitors, suppliers and customers. Operations of the three divisions continued in order to avoid the dispersal of the trained work force, particularly in a tight labor market. In addition to the labor force, the real estate and equipment were important elements of the value available for sale, and inventory and work in process were also on the block.
Sale with Delayed Possession: The most aggressive potential purchaser for the Steel Division did not want the work in process or raw material inventories, or the Fort Payne painting plant. We negotiated an unusual structure whereby Schuler completed the work in process leasing one bay of the plant while the purchaser started its operations in the other bay. The lease was terminated once Schuler's work in process was completed.
The Fort Payne plant was sold to a fabricator of steel pedestrian bridges, which we identified as a potential purchaser through its contacts in the industrial development community.
Several potential purchasers emerged for Clean Earth Environmental Group, including a financial buyer, a competitor and a supplier. A "stalking horse" purchase agreement was negotiated with one buyer and an auction held under the auspices of the Bankruptcy Court. The successful bidder was an affiliate of one of the suppliers to Clean Earth.
The Carbon Products Division sale proved most difficult because of the presence of certain environmental issues identified in a Phase I environmental report. As of this writing, the equipment and personal property have been sold to several former employees of the Carbon Products Division who formed a company to continue the prior business. This new company is leasing the facility from Schuler and the facility remains for sale.
While the liquidation of a company is usually an unfortunate event, we succeeded in preserving much of the core value of Schuler Industries by finding new owners for its businesses. Jobs were saved and much of the secured creditor's debt repaid. The businesses were positioned to grow and prosper.
