Prime Tanning may be auctioned
11 January 2011US leather maker, Prime Tanning could be put on sale at auction next month according to reports in local newspapers located in Hartland, Maine. The auction could take place as soon as the beginning of February. Although not final, the pending auction may involve the sale of some or much of the company’s assets. ‘There’s the potential, though not finalised yet, for an initial bidder to be named,’ Paul Larochelle, President of Prime Tanning, said on January 7.
The town of Hartland, where the tannery is located, is owed more than $300,000 in late tax payments and other debts by the leather-making company. In its bankruptcy filing, Prime Tanning names dozens of creditors and lists its liabilities totaling up to $10 million.
The next key step in the bankruptcy process is for the tannery to get what’s known as a stalking-horse bidder. Under that arrangement, a bankrupt company’s assets are available to a pool of bidders, and the stalking horse is the one that’s selected to make the initial bid. The stalking-horse bidder sets the bar for a purchase price, thereby protecting against low bids for the company’s assets.
The auction, if approved by the bankruptcy judge, would happen under what’s known as a 363 sale of Chapter 11 bankruptcy proceedings. Referring to sub-section 363 of federal bankruptcy law, it allows assets of a company to be sold, such as equipment or property, perhaps in a matter of weeks or months.
Prime Tanning is still operating during the bankruptcy proceedings, ‘Everybody is working and all employees are doing a fabulous job keeping this going,’ Larochelle said.
Prime Tanning, which has 180 employees in Hartland, announced in November that they had filed for bankruptcy protection to reorganise its debt and finances. The tannery has twice before filed for bankruptcy in the last decade.
In its original statement announcing the bankruptcy filing, Prime Tanning blamed its financial troubles on the unprofitable operations at a now-closed facility in Berwick and at a now-sold operation in Missouri. It also pointed to pending, expensive litigation in Missouri, where residents are suing Prime Tanning for allegedly selling to farmers fertilizer containing a cancer-causing chemical. A case that local residents have failed to prove and the company have fought-off all legal challenges so far.
To remain operating during the bankruptcy proceedings, the tannery has received court-approved lifelines including a $550,000 loan from the Maine Rural Development Authority and a $4 million credit line through the firm Porter Capital.
The next bankruptcy court hearing is scheduled for January 27.
Source: Morning Sentinel
