Neenah’s new $54 million automatic molding line gives the company the ability to pour a greater variety of castings than it could previously, while at the same time making schedul- ing more effi cient and fl exible.
down Gregg Industries and [the] Kend- allville [plant]. Neither was competitive.” Both closings were blamed on soft-
ness in the markets served, Kendallville being focused on gray iron castings for air conditioning/refrigeration, engines, gearboxes, stationary transmissions and heavy truck transmissions; Gregg pro- ducing highly-cored iron castings for the industrial, automotive and truck markets. Its production and workforce stream-
lined, Neenah then began the process of streamlining its balance sheet. It hired Rothschild Inc. to provide fi nancial guidance and Huron Consulting for its management expertise. On Feb. 3, Neenah fi led for protec-
tion in the U.S. Bankruptcy Court for the District of Delaware and reached an agreement with its key creditors on the terms of a plan for reorganiza- tion that proposed to reduce its debt by approximately $270 million, while providing 100% recoveries for its sup- pliers and vendors. The company also received commitments for up to $140 million of debtor-in-possession fi nancing (loans paid to a company in bankruptcy that are given fi rst priority for repayment after the restructuring) to fund continuing operations. “We did not lose any customers dur-
ing the bankruptcy,” Caruso said. “We did it in a fashion where we told our suppliers and employees they wouldn’t take a [hit].” Neenah announced on July 2 it had
In addition to the new line, Neenah
spent another $8 million on upgrades at two other facilities.
Recession Hits The largest spending campaign
in Neenah’s history was completed by 2008. That’s when the bottom of the market fell out and the company made the decision to rationalize its non-competitive facilities in Indiana and California. “At the time, the company wanted
to make sure each of its operations was viable,” said Neenah’s acting Chief Executive Offi cer Richard Caruso, a managing director of Huron Consulting Services LLC, Chicago, which was hired to assist in Neenah’s reorganization. “In the lead up to the bankruptcy, we shut
MODERN CASTING / December 2010
secured the fi nancing commitments necessary for its exit from bank- ruptcy. The emergence continued on schedule, with a confi rmation hearing for the reorganization plan held on July 6 and closure on the fi nanc- ing completed approximately three weeks later. By July 30, the company had successfully reduced its debt by more than $270 million, without leav- ing its any of its suppliers, customers or employees in a lurch. “The feedback has been very posi-
tive,” Caruso said. “The decision was to minimize the time and expenses of a bankruptcy and focus on restructur- ing the balance sheet and undertake cost reductions and other profi tability enhancements after the bankruptcy. The fact that all our suppliers were paid has facilitated this process.”
According to 16-year bankruptcy
veteran Christine Baur, Law Offi ce of Christine E. Baur, San Diego, Calif., suppliers and vendors are only one subsection of the creditors that might be involved in a company’s restructuring (bank debt, corporate bonds, employee claims or taxes are other creditor sub- sections). However, Baur said that in general, Chapter 11 reorganization can be a positive move for a large company. “A confi rmed reorganization plan
can restructure a balance sheet, de-lever it, reduce its debt on a going-forward basis, and the company can emerge as a more fi nancially healthy and op- erationally stable company,” she said. “Chapter 11 is an expensive process, and not every company can afford it or get [debtor-in-possession] fi nancing. But if it can, it can be a better situation for the creditors than if the company were liquidated.” Since its emergence from bank-
ruptcy, Neenah has had cash available to perform maintenance it had been putting off for several years, according to Martin. And because of the cutbacks Neenah has already made and the frag- mentation of the metalcasting market, with no single player having more than 10% of the market, Neenah’s executives are now focusing on increasing the competitive position of their facilities. “We think the steps to get the produc-
tion levels aligned were done last time, so we are now focusing on improving effi ciency and cost structure to avoid the need for any future shutdowns,” Caruso said.
Divide and Conquer
For many inside and outside the metalcasting industry, Neenah is syn- onymous with municipal castings. The company’s logo and name can be found on any number of sewer covers and grates around the country, particularly in the Midwest. But 40% of Neenah’s company-
wide production is devoted to serv- ing non-municipal customers, so its future in the wake of the recent bankruptcy depends on both of those
For an audiocast with Neenah execs, visit
www.moderncasting.com.
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