Genesis goes to Chapter 11
Dayton Business Journal - by Dennis Hoerig DBJ Web Editor
Financially-beleaguered manufacturer Genesis Worldwide Inc. filed for Chapter 11 bankruptcy protection today and announced plans to sell its business.
Dayton-based Genesis, which has been in violation of loan covenants for a year, said Pegasus Partners II and KPS Special Situations Fund have agreed to buy the company's domestic assets and business for an undisclosed sum. Other interested parties will have an opportunity to bid on Genesis, in accordance to bankruptcy court policy.
Once the court approves a sale, it will distribute the proceeds among Genesis' creditors.
The company manufactures industrial equipment and employs about 560 people at plants worldwide. It filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Ohio, Western Division.
The court has not assigned a deadline for bids or an auction. The company is asking the court that bids be no less than $22.5 million, including at least $2 million cash and the assumption of liabilities.
Richard Clemens, Genesis president and chief executive officer, said Pegasus and KPS have agreed to pay cash, issue a secured subordinated note and equity interests, and assume certain Genesis liabilities.
Genesis also agreed to a debtor-in-possession loan from Pegasus and KPS, also subject to court approval, for $6 million.
Clemens said that money will be used for employee salaries and benefits, materials and services from vendors and ongoing operating expenses through the closing of the sale.
The business and its 10 subsidiaries will continue to operate as Genesis Worldwide II Inc.
"This new company will be well capitalized with significant liquidity and resources," he said. "The Chapter 11 filing (and) the DIP financing should allow Genesis to operate with no interruption of business, and to satisfy our ongoing obligations to customers while we finalize the sale process."
Clemens said the continuing economic downturn in the metals industry, plus the company's debt load and reduced capital expenditures led to today's decision.
The company's current debt is nearly $90 million.
Genesis manufactures industrial equipment and employs about 560 people at plants worldwide. Company stock was trading down this afternoon, at 45 cents per share on the Over-The-Counter Bulletin Board.
Pegasus Partners II is a $575 million private equity fund that makes control investments in middle market companies that are at points of stress or significant change.
KPS is a private equity fund with more than $210 million in committed capital, with investments primarily in turnarounds, restructurings and other special situations, often in partnership with employees and senior managers.
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