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The
petition, which was filed in U.S. District Court in Wilmington
on Oct. 11, was entered under Chapter 11 of the federal
bankruptcy act which permits reorganization, subject to the
approval of creditors and the court. Public relations spokesman
Stephen Goldberg said that is the company's intention, but that
a proposed reorganization plan was not filed with the bankruptcy
petition, a procedure that is often followed by companies which
expect to emerge from bankruptcy quickly.
During
bankruptcy proceedings, the petitioner is shielded from
foreclosures, property seizures and other actions by creditors.
In this instance, Gen Tek's seeking protection evidently was
self-initiated and not forced by any creditor or group of
creditors.
The
petition lists $1.5 billion of liabilities against $1.2 billion
of assets. It identifies 17 lending institutions and major
suppliers and four individuals to whom $1 million or more is
owed. The largest obligation is to U.S. Bank & Trust N.A.,
trustee for $200 million in subordinated notes carrying an 11%
interest rate.
The
bankruptcy proceeding was entered here because Gen Tek is
incorporated in Delaware. According to the petition it has 20.7
million shares of common stock outstanding with two institutions
and two individuals each owning 5% or more. The number of
shareholders is not given.
Gen Tek's
press statement said that it has $110 million of cash on hand.
Judge Mary Walrath, who has been assigned the case, has given
permission to use up to $5 million to pay suppliers of material
essential for continuing operations that demand up-front
payment..
The
statement said cash flow from operations "should be adequate to
[finance continuing] operations and meet all anticipated
obligations to customers, vendors and employees."
"Gen Tek
is not going out of business. During the restructuring period
and beyond, Gen Tek's operations will continue without
interruption," the statement said.
Hampton,
N.H.-based Gen Tek describes itself "a technology-driven
manufacturer of communications products, industrial components
and performance chemicals." It said the bankruptcy was caused
mainly by an "unforeseen downturn in worldwide telecom spending,
which left us with a dramatically reduced revenue base and the
debt associated with our historically larger revenues and
earnings."
At an
event at the Claymont plant in September,
Tom Testa, vice president of
operations for the company's performance products division, said
the General Chemical subsidiary is profitable. He announced that
it has plans for a significant upgrading of the plant, subject
to approval by Gen Tek's board of directors. Delaforum later
learned that the plan also depends on the ability to obtain the
necessary financing.
Sam
Waltz, public relations consultant for the Claymont plant,
reportedly briefed Claymont civic leaders on the bankruptcy
situation, but he referred Delaforum's inquiry to
Goldberg's public relations firm in New York City. Goldberg said
he was unable to be specific with regard to the Claymont plant
beyond Gen Tek's statement that it "expects to continue its
normal worldwide operations without any impact on its ability to
serve customers in the United States and overseas."
The
bankruptcy filing includes most of Gen Tek's direct and indirect
subsidiaries in the United States and one Canadian subsidiary,
but no other foreign subsidiaries or affiliates.
Frank
Kolling, vice president of the Claymont Community Coalition,
said he and other civic leaders are hopeful that the companies
will soon emerge from bankruptcy and that there will be no
adverse effects on the local plant or plans to remedy air
pollution problems associated with it.
"From
what they've told us, they're still planning on doing the
upgrading. We don't want to see anything [adverse] happen [to
the plant] because they employ a lot of local people. But I
can't say anything more until we find about more about [the
situation]," he said.
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