International Aluminum Corp., a manufacturer of aluminum and vinyl products, announced on April 30 that its plan of reorganization was confirmed by the U.S. Bankruptcy Court for the District of Delaware. Additionally, Atrium Companies Inc., manufacturer of vinyl and aluminum windows and patio doors, says it has successfully completed its balance sheet restructuring and has emerged from Chapter 11. (CLICK HERE for related story about International Aluminum, and CLICK HERE for related story about Atrium.)

DWM magazine spoke to Michael Collins, vice president of the building products group at Jordan, Knauff and Co., about the bankruptcy process and how in some cases this does indeed make the companies emerge stronger.

“There are a couple of primary reasons that companies typically emerge from bankruptcy in a stronger position,” says Collins. “The main reason is that the bankruptcy process typically allows a company to shed the majority of its debt and even its trade payables. In some cases, the company is purchased by another entity as part of the bankruptcy process.”

He points out that, in other cases, such as the Masonite bankruptcy process, the bond holders exchange their debt for the equity of the company. (i.e., the equity holders are wiped out and the bondholders become the surviving equity holders).

“In a situation like that, the company emerges from bankruptcy with equity holders that are obviously extremely bullish on the company’s future prospects and with essentially no debt. The day that Masonite emerged from bankruptcy it had among the strongest balance sheets in the industry,” says Collins.

He does warn however, that companies that undergo bankruptcy proceedings certainly have challenges.

“Some vendors that were not fully paid may refuse to sell to the reorganized company,” he says. “Also, there is always some loss of customers due to the uncertainty surrounding a bankruptcy. However, in a tough market environment such as this, enough companies will eventually undergo bankruptcy that customers will have to be willing to put that fact behind them and push on with reliable vendors.”

International Aluminum to Emerge from Bankruptcy in May

Upon emergence from Chapter 11, which International Aluminum says will be complete some time in May, the company will be known as International Architectural Group LLC (IAG). The company’s brands, United States Aluminum, Raco Interior Products, International Window and International Extrusion, will retain their names.

“Having dramatically reduced our financial debt and strengthened our balance sheet, we are now well-positioned to emerge as a stronger, more competitive company, ready for future growth, while continuing to offer superior products, and outstanding customer service,” says Dick Almy, International Aluminum chief executive officer.

Under the confirmed plan, the company’s secured indebtedness will be satisfied through a combination of new equity, new term notes and a cash payment to its senior lenders. Additionally, trade vendors and suppliers will receive full payment of all pre-Chapter 11 claims upon the company’s effective date or in the ordinary course of business.

“The formation of IAG marks a new era of our company’s 50-year history,” says Almy.

Atrium Companies Inc. Emerges from Chapter 11

Atrium Companies Inc. also has successfully completed its balance sheet restructuring and has emerged from Chapter 11. The company had filed for bankruptcy on January 20, 2010 (CLICK HERE for related story).

As a result of the restructuring, Atrium officials say the company has reduced its outstanding debt by almost 60 percent, from $680 million at the time of filing to approximately $280 million at emergence. In addition, the company has secured $170 million in new equity from Golden Gate Capital and Kenner and Co. and $280 million in new financing.

Also, Golden Gate Capital and Kenner and Co. have acquired 92.5 percent of the reorganized company’s new common stock and former bondholders have received the remaining 7.5 percent of the reorganized company’s new common stock.

Company subsidiary North Star Windows also has completed the restructuring process in Canada, under the Companies’ Creditors Arrangement Act (CCAA).

Atrium’s legal advisors were Kirkland & Ellis in the U.S. and Goodmans LLP in Canada. Its financial advisor was Moelis & Company.

Click on the graphic to enlarge it.

Leave a Reply

Your email address will not be published. Required fields are marked *