By Patrick Cronin
Hampton Union, Friday, December 27, 2005
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- The trustee hired to run Foss Manufacturing during its bankruptcy, has secured a $31 million loan to keep the company operating until spring.
Patrick O'Malley requested the court approve the agreement last week to ensure that Foss has the cash needed to maintain its business and pay its expenses until April while he searches for a potential buyer.
A judge gave the preliminary OK on Dec. 22, but a final hearing on the matter will occur on Jan. 12.
The provider of the loan is CapitalSource, which was one of the main reasons the company filed for Chapter 11 bankruptcy in September.
The company filed for bankruptcy after CapitalSource cut off credit, alleging Foss Manufacturing had fraudulently borrowed millions to benefit itself and the company insiders.
O'Malley is running the company, replacing the former directors and its longtime president, Stephen Foss, who resigned.
The board of directors requested a trustee to run the company because of friction between the board and CapitalSource.
O'Malley stated in court documents that without the loan Foss may be unable to fund all the payments necessary to continue to operate the business.
"The debtor (Foss) runs a very real risk of losing business, employees and facing a situation in which it will be unable to continue its operations, resulting in a forced liquidation of its assets," stated O'Malley in support for the loan in court documents "A forced liquidation of the debtor's assets would result in a substantially lower value than a going-concern sale and therefore be detrimental to all creditors and constituents."
The loan includes funding to hire an investment banker to assist O'Malley in marketing and selling the company.
According to the loan agreement, Foss will pay a loan fee of $200,000 and will have to pay off the loan by April 21, or prior if the company is sold.
Of the loan, approximately $27 million is a roll-over of money owed to CapitalSource and $4.4 million is new financing.
Collateral for the loan includes a lien on all of the company's assets.
At a recent creditors hearing, Glenn Brack, the chief financial officer for Foss Manufacturing, said since the company filed for bankruptcy both sales and revenue have been very strong.
When asked how long the company could survive without new financing, O'Malley refused to answer.
The Hampton-based company with 375 employees manufactures non-woven fabrics and synthetic fibers.