Benada Aluminum Products Files for Chapter 11August 3rd, 2012 by DWM Magazine
Benada Aluminum Products, an extruder based in Sanford, Fla., filed for Chapter 11 bankruptcy two days ago in the U.S. Bankruptcy Court for the Middle District of Florida. The company continues to operate its business and manage its properties, according to court documents, and has 135 employees.
The company was formed as a Florida limited liability corporation on June 15, 2011, to purchase the assets of two aluminum products manufacturing companies: Florida Extruders International and Benada Aluminum of Florida Inc. (BAF). In fact, court documents say, “The debtor’s current financial strain is rooted in the financing used to acquire FEI’s assets,” and notes this as a reason for the filing.
In addition, the company points out in its Chapter 11 filing that its sales revenue over the past year of operations has been steady but insufficient for it to operate with positive cash flow and without the need for further draws on the revolver note. On or around June 20, 2011, Wells Fargo provided two loans to the Debtor in the aggregate amount of $9,720,000 under the terms of a note dated June 20, 2011, in the original principal amount of $4,720,000 and a revolver note dated June 20, 2011, in the original principal amount of $5,000,000. The notes are secured and cross-collateralized by various mortgage and security agreements that grant Wells Fargo a first-priority security interest in all real and personal property owned by the Benada, including its inventory and accounts receivable, according to court documents.
Benada reports that it generated approximately $18 million in sales revenue for the last half of 2011, and $18.9 million for the first half of 2012, according to court documents.
Benada Aluminum has three member companies: FTL Aluminum Products LLC, FTL Capital Partners and BAF. FTL Aluminum is a subsidiary of FTL Capital, which is a St. Louis-based private equity firm owned by Paul D. Melnuk and Thomas J. Hillman. FTL Aluminum holds 35.4 percent of the company’s outstanding membership interests, while FTL Capital holds 40 percent, according to court documents. BAF is co-owned primarily by Monte Friedkin, who served as Benada’s initial CEO and president and holds 24.6 percent of the company, according to the filing; however, his ownership is in dispute, as the bankruptcy petition notes that Friedkin claims he owns 41 percent. Friedkin told DWM magazine that he left the company in October 2011.
The Chapter 11 filing also cites weak sales have led to cash flow problems and have required the company to purchase inventory cash on demand from all of its suppliers as a contributor to the filing. Additionally, the petition cites the fact that the company has faced an “impending inability to purchase raw materials for the past two months.” Accordingly, in June 2012 Benada officials say they began negotiations with Wells Fargo to restructure its current obligations and obtain additional operational funds to allow it to purchase additional inventory and necessary raw aluminum. On June 26, 2012, however, Wells Fargo declared Benada Aluminum in default of its loan.
“Without additional financing, as of Wednesday August 1, 2012, the debtor will run out of the aluminum billet necessary for producing its products and will be forced to halt operations,” state the documents. Based on this, Benada officials say they chose to file for bankruptcy in an effort to gain liquidity and restructure the company’s debts while continuing operations.
“The debtor hopes to gain liquidity by securing DIP financing that will allow it to purchase more billet and inventory, which in turn will increase [its] borrowing base and free up funds under the revolver note,” writes the company in its Chapter 11 filing. “The debtor has discussed DIP financing arrangements with both FTL Capital and Wells Fargo, and the parties expect to reach an agreement soon on DIP financing terms and conditions. The debtor therefore will be moving very shortly for Court approval of DIP financing agreements with both FTL Capital and Wells Fargo.”
The company listed between 100 and 199 creditors, with estimated assets between $10 million and 50 million, and estimated liabilities between $10 million and $50 million in its voluntary petition for bankruptcy, signed by company chairman and CEO Paul Melnuk. The largest industry unsecured creditors, according to court documents, include American Douglas Metals ($25,800.06) and Hydro Aluminum ($1,361,295.77).
Officials at Benada Aluminum had not responded to DWM’s requests for comment at press time. Stay tuned to dwmmag.com for further updates.