On February 2, 2020 (the ” Petition Date “), API Americas Inc. (the “Company”) and API (USA) Holdings Limited (collectively with the Company, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by Saul Ewing Arnstein & Lehr LLP. The case has been assigned to the Honorable Christopher S. Sontchi. A hearing on the Debtors’ first day motions was held on February 4, 2020. A meeting to form the unsecured creditors’ committee was held on February 13, 2020.
Headquartered in Lawrence, Kansas, the Company is a manufacturer of foils, laminates, and holographic materials. Among other customers, the Company provides packaging to companies in the premium drinks, confectionery, tobacco, perfume, personal care, cosmetics, and healthcare sectors. The Company’s foils business footprint is comprised of its headquarters and manufacturing facility in Kansas, as well as three leased distribution centres, located in Lawrence, Kansas, Santa Fe Springs, California and Levittown, Pennsylvania. The Company’s laminates business provides laminated papers and board products. The laminates business footprint has one central location in Osgood, Indiana.
The Debtors have faced substantial deterioration in revenue and profitability as well as inconsistent quality and high scrap volumes, and have suffered from operating losses over the last couple of years, arising from three main factors: a significant drop in demand for their products due to unfavourable market dynamics and a shift toward more environmentally sustainable products (primarily due to changes in the tobacco market), business integration challenges since consolidating one of the Debtors’ locations into another, and the necessity to invest in capital projects to help fund a plant acquisition, which was also followed by unforeseen expenditures and adverse market conditions. The three issues have caused decreased cash flow and operating losses, and a combined drop in approximately $11 million in revenue between the foils and laminate businesses between 2016 and 2019. In addition, the manufacturing sector, in general, has faced economic headwinds in recent months with the industry seeing its fastest rate of contraction since June 2009.
The Company has implemented headcount reductions, but in order to preserve additional value, the Debtors are pursuing a sale to stabilize the business, facilitate the efficient administration of these cases, lessen the impact of the cases on day-to-day operations, and facilitate a successful chapter 11 plan ( See Mitchell Gendel Affidavit in Support ).
As of the Petition Date, the Debtors estimate approximately $47.3 million in long-term liabilities, consisting of $44.4 million in principal owed on a loan from PNC Bank, National Association and a group of lenders for which it acts as an agent, and $2.9 million in intercompany liabilities. The Debtors’ unsecured obligations are unspecified but total over $2.5 million, the bulk of which is trade debt.
The Debtors require immediate access to liquidity to ensure they are able to continue operating their businesses during these cases, preserve the value of their estates for the benefit of all parties in interest, and administer a value-maximizing chapter 11 process. The Debtors have prepared a thirteen-week cash-flow budget reflecting the need of approximately $516,000.
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| Approximately $4.7 million. |
| Unspecified but at least $2.5 million. |
| FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | |||||||||||||
| Interim Relief Up to $250,000. | Final Relief Up to $500,000. | ||||||||||||
| Interim Relief An amount not to exceed $100,000. | Final Relief An amount not to exceed $100,000. | ||||||||||||
| (pg. 31 of Affidavit) | |||||||||||||
| Authorization to pay taxes as they come due. Debtors estimate at least $37,600 is owed in various taxes, none of which will be due in the first month of these cases. | |||||||||||||
| Employees: As of the Petition Date, approximately 125 full-time (90 hourly/35 salaried) | |||||||||||||
| Interim Relief Approximately $344,850. No payment shall exceed the statutory cap of $13,650. | Final Relief Approximately $375,000.
No payment shall exceed the statutory cap of $13,650. | ||||||||||||