Massachusetts Manufacturer Faces Bankruptcy Storm
The plastics company Gloucester Engineering is facing increasing pressure from creditors to enter Chapter 7 bankruptcy, according to the Gloucester Daily Times.
Using claims that the company owes them money, these creditors are pressing the struggling manufacturer, as Gloucester Engineering searches for a major investor to help them keep their creditors at bay.
According to the Times, there are dozens of additional suppliers that are attempting to get payments from Gloucester Engineering.
The three suppliers attempting to force Gloucester into Chapter 7 bankruptcy have filed an involuntary Chapter 7 bankruptcy petition against the Blackburn Industrial Park in federal court.
The Daily Times called Gloucester Engineering “an innovator in plastics and a pillar of Cape Ann’s, [Massachusetts’s], small industrial base.” Gloucester is one of the oldest non-marine industry in the city of Cape Ann.
Michael Hale is the lawyer for one of the three suppliers, Hub Technologies, that has filed the involuntary Chapter 7 bankruptcy, who said, “I don’t know when the last payment to my clients was. It was quite a long time ago. We only brought suit when communication between the parties dried up.”
Ranor Inc. and Webex Inc. are two additional companies that have also filed a petition against Gloucester Engineering. Another firm out of the Dominican Republic, Plastifar S.A., has also filed a claim. These companies are together claiming in the area of $438,000 in debt.
Hub Technologies, which provides high volume, complex fabrication of components and equipment, joined the petition after Gloucester Engineering defaulted on a civil suit from back in February. Hub is claiming $40,000 is owed to it, according to documents filed in court.
The Chairman at Gloucester Engineering, John Sharood, would not comment on the legal situation unfolding for the troubled company. He did acknowledge, however, that the company is searching for new investors to provide much-needed cash that could potentially spur structural changes.
“The company is looking for new capital,” he said. “We are working closely with partners, customers and supply base and hope the situation will be resolved for the best.”
He also assured the public that the status of the company is the same, that they would continue to take orders and operate its plastic-making machinery.
Sharood purchased the company, with a group of investors, from a German company in 2007. It was a difficult time, though, for the industry as a whole, and Gloucester Engineering was no exception.
Just a year after the new ownership group took the reins, orders for manufacturing from its huge, million-dollar machines started to drop as the economy suffered worldwide. Customer bankruptcies, canceled orders and long periods between new orders began to create troubled cash flows. The company went from employing 400 people in 2006 to about 200 in January of 2010.
Sharood wouldn’t say how many employees still work at the company, though former employees have rumored that there were additional layoffs.
In January 2010 the president of Gloucester Engineering, Carl Johnson, sent out an email to the company’s suppliers, asking them to discontinue sending materials.