News

October 14, 2002

General Chemical's parent company, Gen Tek Inc., and 32 of its subsidiaries, including General Chemical, have filed voluntary bankruptcy. While not specifically addressing the possible fate of its sulfuric acid plant in Claymont, the company said it intends to remain in business during the court proceedings and beyond.

The petition, which was filed in U.S. District Court in Wilmington on Oct. 11, was entered under Chapter 11 of the federal bankruptcy act which permits reorganization, subject to the approval of creditors and the court. Public relations spokesman Stephen Goldberg said that is the company's intention, but that a proposed reorganization plan was not filed with the bankruptcy petition, a procedure that is often followed by companies which expect to emerge from bankruptcy quickly.

During bankruptcy proceedings, the petitioner is shielded from foreclosures, property seizures and other actions by creditors. In this instance, Gen Tek's seeking protection evidently was self-initiated and not forced by any creditor or group of creditors.

The petition lists $1.5 billion of liabilities against $1.2 billion of assets. It identifies 17 lending institutions and major suppliers and four individuals to whom $1 million or more is owed. The largest obligation is to U.S. Bank & Trust N.A., trustee for $200 million in subordinated notes carrying an 11% interest rate.

The bankruptcy proceeding was entered here because Gen Tek is incorporated in Delaware. According to the petition it has 20.7 million shares of common stock outstanding with two institutions and two individuals each owning 5% or more. The number of shareholders is not given.

Gen Tek's press statement said that it has $110 million of cash on hand. Judge Mary Walrath, who has been assigned the case, has given permission to use up to $5 million to pay suppliers of material essential for continuing operations that demand up-front payment..

The statement said cash flow from operations "should be adequate to [finance continuing] operations and meet all anticipated obligations to customers, vendors and employees."

"Gen Tek is not going out of business. During the restructuring period and beyond, Gen Tek's operations will continue without interruption," the statement said.

Hampton, N.H.-based Gen Tek describes itself "a technology-driven manufacturer of communications products, industrial components and performance chemicals." It said the bankruptcy was caused mainly by an "unforeseen downturn in worldwide telecom spending, which left us with a dramatically reduced revenue base and the debt associated with our historically larger revenues and earnings."

At an event at the Claymont plant in September, Tom Testa, vice president of operations for the company's performance products division, said the General Chemical subsidiary is profitable. He announced that it has plans for a significant upgrading of the plant, subject to approval by Gen Tek's board of directors. Delaforum later learned that the plan also depends on the ability to obtain the necessary financing.

Sam Waltz, public relations consultant for the Claymont plant, reportedly briefed Claymont civic leaders on the bankruptcy situation, but he referred Delaforum's inquiry  to Goldberg's public relations firm in New York City. Goldberg said he was unable to be specific with regard to the Claymont plant beyond Gen Tek's statement that it "expects to continue its normal worldwide operations without any impact on its ability to serve customers in the United States and overseas."

The bankruptcy filing includes most of Gen Tek's direct and indirect subsidiaries in the United States and one Canadian subsidiary, but no other foreign subsidiaries or affiliates.

Frank Kolling, vice president of the Claymont Community Coalition, said he and other civic leaders are hopeful that the companies will soon emerge from bankruptcy and that there will be no adverse effects on the local plant or plans to remedy air pollution problems associated with it.

"From what they've told us, they're still planning on doing the upgrading. We don't want to see anything [adverse] happen [to the plant] because they employ a lot of local people. But I can't say anything more until we find about more about [the situation]," he said.

2002. All rights reserved.

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