TORONTO Indiana Steel
& Tube Inc. has filed for Chapter 11 bankruptcy protection,
listing steel distributors as its biggest unsecured
The Brownstown, Ind.-based steel
tube and pipe maker, which had gross revenue of more than $40
million in 2011, estimated its liabilities at between $10
million and $50 million in documents filed in U.S. Bankruptcy
Court in Indiana.
The filing will not impact
customers and should actually boost customer service, according
to Jerald Ancel, an attorney for Taft Stettinius &
Hollister LLP, which is representing Indian Steel &
Indiana Steel & Tube is
slated to receive $8.5 million in debtor-in-possession
financing from Columbus, Ind.-based Indiana Bank & Trust
Co. (IBT), one of several secured creditors in the case, about
$500,000 more than was available before the bankruptcy filing,
"Not only is the bank supporting
the company, it is actually increasing its line so that we have
more availability to meet customer demand," he said. "So the
(bankruptcy) will not affect our customers in any way, shape or
form. It will improve the position."
IBT has already negotiated and
agreed to the interim financing package, although it remains
subject to court approval.
Indiana Steel & Tube had
been experiencing financial problems since at least January
despite what the company characterized as "consistently strong"
sales, according to court documents.
Despite the strong sales, the
company by early January began to "experience working capital
issues and an inventory imbalance." Senior management decided
to liquidate some inventory to boost working capital, but by
the end of February, it was "evident" that liquidating a
portion of its finished goods inventory had not solved the
companys cash-flow issues, because "there was a
discrepancy between the actual and book inventory," the company
said in court documents.
Indiana Steel & Tube hired
accounting firm Agresta, Storms & OLeary PC to
determine the scope and cause of the discrepancy, which Agresta
determined to be "substantial" and is still under
investigation, according to court documents.
The inventory discrepancy
reduced the cash available to Indiana Steel & Tube from
IBT, the company said in court documents. "Although IBT has
worked with (Indiana Steel & Tube) in stabilizing
operations, (the company) needs additional liquidity to fill
customer orders and reach optimal operations efficiency,"
according to the documents.
The bankruptcy filing should
allow Indiana Steel & Tube to find a "better forum" to seek
more operating capital, either through a sale or a third-party
investor, the company said in court documents. The filing also
will allow the company to obtain the raw materials and
inventory necessary to operate at full capacity, fill customer
needs and return to profitability.
The list of unsecured creditors
appears to include many of the companys steel suppliers.
The top five unsecured creditors are Mill Steel Co., Grand
Rapids, Mich., owed more than $2.67 million; Four Star Steel
Sales LLC, West Bloomfield, Mich., owed more than $1.2 million;
Alliance Steel LLC, Bedford Park, Ill., owed $948,197; Charter
Steel Trading Inc., Chicago, owed $900,259; and Mainline Metals
Inc., Bala Cynwyd, Pa., owed $723,311.