Katy Industries, Inc. (fka KATYQ)

[Enterprising Investor]

Katy Industries files for bankruptcy, plans asset sale (5/15/17)

Katy Industries Inc. has filed for bankruptcy and plans to sell the majority its assets to a newly created investment vehicle co-owned by Highview Capital LLC and Victory Park Capital Advisors.

Maryland Heights-based Katy, which manufactures and distributes commercial cleaning and storage products, announced Sunday night that it had entered into an agreement to sell "substantially all" of its assets to the Highview/Victory entity for a combined cash and credit offer. The company said that to facilitate the sale, it and certain of its subsidiaries had filed for Chapter 11 reorganization in Delaware bankruptcy court.

Chicago-based Victory Park in September bought all of Katy Industries' holding company's stock in a $6.5 million deal. The holding company had held 1.13 million shares of Katy's stock, with 7.9 million shares outstanding.

Katy Industries said that the new agreement with Highview Capital and Victory Park would provide long-term financial stability and provide the company with the resources needed to sustain its operations.

Katy will be filing a motion to allow other companies to bid for the assets being sold. The company expects the court-supervised sale process to be completed within 60 to 90 days. In court papers, Katy listed assets of $821,321 and debts of $58.4 million. Local creditors include Koller Craft Plastics, with an unsecured claim of $202,639.

"Our goal is to put the Company on the proper financial footing, de-lever our balance sheet and use the influx of new funding to recover the business and position our operations for future growth while, at the same time, providing a mechanism to address the liquidity constraints and legacy liabilities that have impacted our ability to operate efficiently and effectively," Robert Guerra, president and CEO, said in a statement. "By utilizing the Chapter 11 process, we are able to ensure an expedited and orderly sale transaction."

Katy has received a commitment for up to $7.5 million in debtor-in-possession financing from the Highview/Victory Park entity, which, if approved by the court, would be used to maintain operations during the sale process.

Six of eight of Katy's board members resigned last fall after Victory Park acquired the holding company's stock. In October, Katy fired its former CEO, David Feldman, who had led the company since 2008. Feldman later filed suit, alleging that he was not fired for cause, as Katy had stated.

Katy Industries manufactures, imports and distributes commercial cleaning and consumer storage products, which it markets under the Continental, Contico, Wilen, Fort Wayne Plastics and Commander brands.The company said it employed 301 people as of Dec. 31, 2015. It operates injection molding and manufacturing facilities in Jefferson City; Hazelwood; Fort Wayne, Indiana; and Tiffin, Ohio; with distribution centers in Berkeley, Missouri, and Toronto.

For the quarter ended Sept. 30, the company reported sales of nearly $24 million, down more than 22 percent from the prior-year quarter. Katy’s loss widened that quarter to $5.4 million, compared with $1.6 million in the same quarter of 2015.

Lawrence Perkins is the chief restructuring officer for Katy, located at 11840 Westline Industrial Drive.

http://www.bizjournals.com/stlouis/news/2017/05/15/katy-industries-files-for-bankruptcy-plans-asset.html