Case Studies

ACQUISITION OF INTACT MANUFACTURING FACILITY—BLUE ISLAND PHENOL

Background

At its peak, the Blue Island refinery processed 3.4 million gallons of crude oil per day, from which it produced approximately 2 million gallons of gasoline. It also produced diesel fuel, kerosene, asphalt, liquefied petroleum gas, butane, and sulfur. The facility had a contentious relationship with the local communities due to environmental concerns. The decision to close the refinery, which also has been cited over the years for various environmental violations, was based solely on economic factors, claimed the operator, Premcor Refining Group Inc.

The Challenge

The facility consisted of three individual buildings totaling 10,000 square feet, 16 acres of land as well as refinery and crude oil processing and storage equipment. The complexity of the acquisition was compounded by the nature of the manufacturing processes and the history of environmental violations at the site. Reich Brothers Decommissioning in conjunction with Reich Brothers, LLC’s principal acquisition team jointly considered the real estate and machinery and equipment with respect to the value and potential disposal and remediation options.

The Outcome

Reich Brothers acquired the facility in its entirety. The decommissioning division managed the asbestos abatement process and demolished the free-standing buildings. Our real estate department signed up multiple lessees. Finally, the acquisition division managed the auction of the machinery and equipment. The transaction, due to the combined efforts of the various divisions, enabled the seller to monetize the value of an encumbered facility efficiently and without overtaxing management time.

ACQUISITION OF INTACT MANUFACTURING FACILITY—UNILEVER MELROSE PARK

Background

The location at Melrose Park, Ill. became expendable upon Unilever’s acquisition of Alberto Culver. This facility was the headquarters, research and development, and manufacturing location of Alberto Culver, turning out Alberto VO5 and TRESemme shampoos. The plant also made Nexxus shampoos and conditioners, as well as St. Ives lotions and body wash. The facility consisted of about 534,000 square feet spread over five buildings and located on 18.7 acres. The facility had 354,000 square feet of warehouse space and 180,000 square feet of office space.

The Challenge

The scope of the facility, potential environmental issues, and large component of machinery and equipment mandated that all Reich Brothers’ divisions act in concert to ensure a successful transaction. The majority of the equipment was deemed to have been in good condition as was the real estate and buildings. However, certain environmental conditions, the existence of six underground oil tanks, and possible vapor protrusion had to be given due consideration. In addition, a flood issue, depending on the end-user, may have required modification of flood maps and mitigation measures.

The Outcome

Reich Brothers, LLC and its acquisition partners completed the auction of machinery and equipment within five months of the acquisition. The successful auction and subsequent removal of the buildings’ contents allowed Reich Brothers to run an effective real estate marketing campaign. The environmental issues were deemed innocuous by the Reich Decommissioning team. The property, buildings, and certain remaining equipment are to be marketed as an intact plant sale to an end-user. The seller greatly reduced the costs associated with maintaining and marketing the facility as well as the management time involved in selling a large, multi-faceting transaction.

ACQUISITION OF INTACT MANUFACTURING FACILITY—ABBOTT LABS - CANADA

Background

The Brockville Abbott plant produced the nutritional formula Ensure and Similac baby formula, and once employed more than 150 people. The company decided to close the facility because it was no longer producing formulas in recloseable plastic bottles necessitated by a shift in consumer demand. Upon learning of the plant’s closure, the Economic Development Corporation of Brockville, Ontario was keen to find a user of a similar nature to preserve the employment base.

The Challenge

The food-grade facility was contained in a 200,000 square foot building in Brockville, Ontario, located on the Saint Lawrence River. The building was built in 1940 and was about 40,000 square feet; an additional 60,000 square feet were added in the 1980s, and 100,000 square feet in 2006. The machinery and equipment consisted of 400 individual pieces of equipment utilized in the processing, storage, and packaging of nutritional drinks. These assets included filling, capping, labeling, and sterilization equipment as well as conveyor systems and food-grade storage tanks and silos. The local government desired the nature of the plant to remain unchanged due to the high value of the manufacturing jobs to the local economy.

The Outcome

Reich Brothers worked closely with the Economic Development Division of Brockville, Ontario to find a suitable buyer for the facility – one that would preserve employment and contribute to the local economy. After a thorough marketing of the facility as an intact plant, Reich Brothers reached an agreement with an entirety buyer. It was expected that the buyer would employ close to the number of individuals as it had in the past. Both the locality and Reich deemed the acquisition and subsequent intact plant sale a success.

DISPOSITION OF ASSETS AS DIRECTED BY BANKRUPTCY TRUSTEE—MULTINATIONAL ALUMINUM & VINYL BUILDING PRODUCT MANUFACTURER

Background

The company manufactured aluminum and vinyl building products for commercial and residential construction and renovation. Its products included windows, doors, curtain and window walls, interior wall systems, office partitions, doors, and frames. In addition, the company produced custom aluminum extrusions for internal consumption and other manufacturers. The company had a brief stint in Chapter 11 bankruptcy and filed Chapter 7 and initiated asset bankruptcy liquidations not long thereafter.

The Challenge

The United States Trustee engaged Adam Reich and Jonathan Reich to dispose of the assets in a timely manner and with an eye toward maximizing creditor restitution. Assets included 18 domestic facilities, machinery and equipment, inventory, accounts receivable, real estate, and intellectual property.

The Outcome

The Reich brothers and their partner sold the manufacturing assets and intellectual property in bulk to an industry competitor, sold surplus real property via a private treaty sale, and conducted an orderly liquidation of the account receivable portfolio. The strategy exceeded the expectations of the trustee. In the aggregate, the assets were monetized for roughly $20 million.

ACQUISITION OF ASSETS VIA 363 SALE—LARGE PAPER MANUFACTURER

Background

The company was a producer of specialty packaging and printing papers for publishers, printers, and converters. The company filed for restructuring under the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice. The company also filed for protection under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.

The Challenge

The filing resulted in the sale of the Gorham, N.H. paper mill. The Reich brothers and partner acquired the mill by way of its back-up bid after the high bidder defaulted. There was significant local publicity due to active involvement by local elected officials and union officials to prevent bankruptcy liquidation and save local jobs. The assets included equipment, real estate, and recoverable metals. As this was a large turnkey facility, the principals recognized that the plant had significant enterprise and liquidation value. The assets were purchased at forced liquidation value (FLV).

The Outcome

The Reich brothers, in order to attract prospective bulk buyers, kept the plant in a “hot idle” state, requiring a substantial investment in monthly maintenance and operating expenses. In order to facilitate an intact plant sale, an investment banker specializing in the paper industry was retained and the facility was marketed on a turnkey basis for four months. Within five months, the team accepted a going concern bid, and negotiated and closed sale 60 days from the acceptance of offer.

DISPOSITION OF ASSETS AS DIRECTED BY BANKRUPTCY TRUSTEE—MAJOR AEROSPACE MANUFACTURER

Background

The company developed, certified, and manufactured light business jet aircrafts. In addition, it offered maintenance, factory-based flight training, factory-based spares and logistics support, technical publications, and other support services. Emirates Investment and Development purchased 80 percent of predecessor shares. In October 2008, the company filed for Chapter 11 protection in the U.S. courts. The Company listed $80 million of assets and $77 million of debt. The global financial crisis had drastically reduced the demand for business jets, the company said in documents filed with the U.S. Bankruptcy Court in the District of Delaware.

The Challenge

The proprietary nature of assets meant traditional lenders for a Debtor–in-Possession (DIP) loan were difficult to find. The assets included machinery, equipment, inventory, aircraft engines, and valuable leasehold interests. Jonathan Reich and Adam Reich undertook an accurate valuation of assets to determine loan-to-value in the event the company was unable to attract going concern offers and forced to liquidate. The loan was underwritten at forced liquidation value (FLV) with the Reich brothers and their partners providing a $4 million DIP loan. In addition, they devised a successful strategy where the court approved them as DIP lender and dual sales agent for assets if a going concern buyer was not found.

The Outcome

The Reich brothers helped orchestrate the Section 363 sale auction for assets in which a majority of assets sold on a going concern basis. The lending facility was utilized for an average hold period of 287 days. Today, the company operates as a subsidiary of a larger corporate entity.