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American LaFrance expected to emerge from bankruptcy
By Dan McCue
Staff Writer
American LaFrance likely will emerge from Chapter 11 protection on May 22, according to a spokesman for the investment group that owns the 176-year-old company.
Its return to solvency comes just five months after American LaFrance sought the protection of the federal bankruptcy court in Delaware, citing breakdowns in vendor-installed computer programs that led to inventory shortages and other operating problems.
The automation failures have plagued the company since late last summer along with slowing demand from its municipal customers, who have been feeling the pinch of a faltering economy.
Pen Pendleton, senior vice president of the Abernathy MacGregor Group, an adviser to American LaFrance owner Patriarch Partners, said the emergency vehicle manufacturer’s anticipated emergence from bankruptcy protection is a direct result of creditors’ overwhelming support of the company’s reorganization plan.
In balloting conducted in April, American LaFrance’s secured lenders and its largest class of other creditors gave unanimous support to the reorganization plan. Eighty-six percent of its unsecured creditors also said it met with their approval.
U.S. Bankruptcy Court Judge Brendan Linehan Shannon has scheduled a May 22 hearing on the vote. If satisfied with what he sees and hears, Shannon is expected to also endorse the plan, ending the bankruptcy.
“At that point, American LaFrance is a company again,” said Pendleton.
Under its reorganization plan, American LaFrance will repay its unsecured creditors out of a fund that will include more than $6 million in cash and the proceeds from the sale of two buildings.
Unsecured creditors owed $2,500 or less, or those willing to reduce their claims to $2,500, will be paid in full but without interest.
The plan also calls for the company to take responsibility for an additional $28 million in debt. When it filed for bankruptcy in January, the company said it owed unsecured creditors more than $85 million.
As part of the reorganization, American LaFrance also has vowed to streamline its operations by closing a parts distribution center in Hanahan and a chassis manufacturing operation in Jedburg.
The work done at those facilities is being moved to the company’s recently opened new headquarters in Summerville.
Other facilities being closed include the company’s ambulance manufacturing plant near Orlando, Fla., and a customer service center in Pennsylvania.
In a written statement, company officials said the plan would result in American LaFrance emerging from bankruptcy as a leaner and stronger company. Though it was refined twice in the first month of the company’s bankruptcy, a third revision garnered the support of the official committee of unsecured creditors, which rallied other creditors behind it.
“Based on broad and deep creditor support, we are optimistic that the court will approve the plan,” said William Snyder, the company’s chief restructuring officer, in a written statement.
Pendleton said the period between now and the May 22 hearing is expected to be relatively quiet, barring a last minute objection by a creditor who hasn’t yet ventured an opinion on the plan or some unforeseen business development.
In the meantime, American LaFrance’s Summerville plant continues to work on a full production schedule. About two months ago, the company recalled the employees it furloughed in December.
Since the workers returned, the company has been keeping them aware of the latest developments in the bankruptcy.
“While the attention in these situations often seems to be elsewhere, the most important thing for a company like American LaFrance to do in a case like this is strive to keep the employees happy,” Pendleton said. “The last thing you need is for workers to start leaving while you’re trying to get back in business.”
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@scbiznews.com.
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