Pipe maker Imperial PlasTech restructuring with support from global hose and pipe producer
Pipe production continues at Imperial PlasTech Inc., despite the company's tumultuous financial situation of the pa...
Pipe production continues at Imperial PlasTech Inc., despite the company’s tumultuous financial situation of the past few weeks. Imperial PlasTech and its subsidiaries were placed into receivership on June 12, but emerged from that status on July 3, under creditor protection in order to facilitate restructuring and continued operations. The PlasTech Group is comprised of Imperial PlasTech, formerly based in Peterborough, ON, and its subsidiaries Imperial Pipe Corp., Imperial Building Products Corp., Ameriplast Inc. and Imperial Building Products (U.S.) Inc., which collectively produce polyethylene pipe, telecommunications conduit and wood-fibre plastic composite decking products.
The PlasTech Group was effectively saved from liquidation when one of its shareholders, Greek pipe and hose producer A.G. Petzetakis (AGP), purchased the approximately $3.1 million debt owed by the PlasTech Group to the secured creditor that placed it into receivership. The former Board of Directors and management of the PlasTech Group, including president and CEO Victor D’Souza, have resigned.
The restructuring is expected to involve securing a stable source of working capital, increasing the PlasTech Group’s productivity with technical assistance from AGP and compromising existing debt. To facilitate this restructuring, AGP intends to invest significantly in Imperial PlasTech in exchange for a controlling equity interest.
A plan is expected to be presented to creditors in the next few months.
Peter Perley, who was appointed chief restructuring officer by the court on July 3 reported to creditors that the PlasTech Group’s pipe operations in Edmonton, AB, have already benefited from some technical assistance from AGP. The scrap rate has been reduced and the value of orders out of the Edmonton plant is higher than projected.
Perley also reported in mid-July that the wood-fibre plastic composite business of Imperial Building Products was continuing operations, however the decision by the Business Development Bank of Canada to enforce its mortgage on the PlasTech Group facility in Peterborough was presenting an obstacle for this business segment.
The profitability of the PlasTech Group had been declining for several years. The company expanded into the U.S. market in the pipe and telecommunications sectors, but lost money on those operations in 2001 and 2002. The PlasTech Group attributed the losses to excess capacity in the pipe market and a demand slump in the telecommunications business. Following write-downs, sales of non-core assets and continuing losses, Imperial PlasTech Inc. incurred a net loss of $24.4 million in 2002, compared with a net loss of $5.3 million in 2001.
The one bright spot during 2002 was the launch of the building products unit, which started shipping in the second quarter of 2002 and contributed approximately 8% of total sales.