Axion International in Zanesville, Ohio, on Wednesday said that it plans to sell its assets under bankruptcy protection.
The building materials company said in a Securities and Exchange Commission filing that last month it had made a deal with Plastic Ties Financing for a $500,000 loan, in anticipation of Axion filing for bankruptcy protection under Chapter 11.
Because of the loan deal, investor Allen R. Kronstadt agreed to forgive at least $3.2 million of the roughly $5.2 million he has lent Axion in exchange for its assets. Kronstadt serves as manager of Plastic Ties Financing.
Axion will seek to implement a 363 sale of substantially all of the assets of the company. In connection with this sale, the company on Nov. 25 made a deal with Kronstadt to act as a “stalking horse bidder” in an auction to sell Axion’s assets.
A Wall Street Journal article cited Axion’s bankruptcy court papers, in which the company blamed its bankruptcy filing and need for a sale on liquidity issues and recurring operational losses. It has sought to right the ship by curtailing production, liquidating available inventory, and seeking new investors, but these efforts have been “largely unsuccessful.”
The company recently disclosed its doubts about its ability to continue as a going concern, the WSJ said.
To fund its operations through a sale, Axion is seeking bankruptcy-court approval to tap a $2.2 million loan from Plastic Ties Financing.
“These chapter 11 cases will allow the debtors to maintain operations and save jobs while providing the necessary time to complete the current sales process for the benefit of stakeholders,” Axion Chief Financial Officer Donald W. Fallon said in court papers. “Absent the protections of the bankruptcy code, the debtors will run out of cash, shut down operations, lay off employees, and liquidate, all to the detriment of the debtors’ employees, customers, suppliers, and creditors.”
Axion reported debts in the range of $10 million to $50 million in its chapter 11 petition, the WSJ said. The company said it doesn’t believe there will be funds left over for unsecured creditors after secured and other higher-ranking claims are repaid.