Tuesday, December 1, 2009

Arch files for bankruptcy. What’s next?

One of the big names in aluminum storefront and glass fabrication tripped last week: Arch Aluminum and Glass Co. filed for voluntary Chapter 11 bankruptcy, Nov. 25, with the Southern District of Florida U.S. Bankruptcy Court. Court documents list the fabricator's assets at $0-$100,000, with $100MM-$500MM in liabilities, according to TrollerBk.com. The filing does not include Arch's Canadian holdings or Trulite.

Trouble had been brewing at the company for awhile. Arch had 28 facilities in 17 states and 2,400 employees, but in October announced it was "selectively closing or temporarily shuttering" facilities in: Kansas City; Rogers, Minn.; Nashville; and Sarasota, Fla.

According to a South Florida Business Journal report on Nov. 30, “The company said in a news release it would sell all assets to an affiliate of Grey Mountain Partners LLC (“GMP”), a leading private equity firm in Boulder, Colo. The company said it would seek approval for an expedited auction process with the GMP agreement as a so-called “stalking horse” bid, but it did not immediately disclose the bid amount.”

In an interview with Glass Magazine, Leon Silverstein, president and CEO of Arch, said: "It was the size and fall of the economy that caught everybody off guard. With sales down in excess of 20 percent, it is much harder to manage through."

The primary problem was not being able to restructure debt, Silverstein said. "We have a syndicated loan of seven banks. Just think about trying to get seven people to do something. And with the problems the banks have, with the regulators up their rear end, it’s just hard to do things."

What does Arch’s bankruptcy signify to the industry? In particular, to the commercial glazing sector?

At McGraw Hill Construction’s Outlook 2010 Conference Oct. 15-16, Robert Murray, vice president, economic affairs, McGraw Hill Construction, New York, said that the value of new construction starts in 2009 was estimated at $419 billion, a 25 percent decline that follows shortfalls of 13 percent in 2008 and 7 percent in 2007. The level of construction starts in 2010 is expected to climb 11 percent to $466.2 billion, he said. Read story.

However, commercial building construction is not out of the woods yet. Bankers are still tightening lending standards and affecting projects, Murray said. The recovery in commercial construction has been pushed back to 2011 at the earliest, assuming that credit markets continue to improve and lending conditions become more accommodative, according to the Construction Outlook 2010 report.

Max Perilstein, Arch's vice president of marketing, pegged commercial glass industry's recovery even further back. On Nov. 19, he wrote in his blog: “Some analysts see the commercial glass industry struggling until … get this … 2013! Seriously that was a prediction and the first I have seen that has not shown the uptick coming by the end of 2010. Just typing this boggles my mind, but we’ve had such a solid run for a long time, you just can’t fathom that some of the tough times could continue that long.”

What is your take on the market? Will more major players falter before we go on the upswing again?

—By Sahely Mukerji, Senior editor, Glass Magazine

15 comments:

Anonymous said...

Once again the banking industry is at fault. Allowing such a established company default is a crime in itself. The banks are dying for business yet their greed is what has destroyed the American economy.......Where's our government hand out - like the banks and auto industry received to maintain their industry......Obama is certainly making changes, but not for the better of this country!

Anonymous said...

Not only is the banking industry at fault but also the builders and manufacturing company for raising their profit cost and being greedy by overpricing their products and not delivering good quality products which is the reason why companies in the U.S.A. are buying from companies oversea. The Americans complain now but where were they when they were delivering and manufacturing bad product and cheating in their test results. Obama can't control companies that don't have integrity and care for the American consumer and I'm a Republican! God Bless the U.S.A. we are reaping what we've been sowing!! ARP Orlando-Florida

Anonymous said...

To say the banks are at fault is absurd, the idea behind borrowing is that you are wise with your money and pay it back. It is not the banks fault but corporate mismanagement, the banks are not required to lend if a company is over extended.

I wonder how the creditors feel right now. It is a shame individuals, now businesses, live beyond their means and shamelessly use the bankrupcy laws to cover their "roll of the dice".

President Obama, or our commander in chief, is not to blame for reckless behavior

Anonymous said...

Arch is not the only company in this industry to falter due to poor management and they won't be the last, remember Amarlite? Oh, that's right, they bought Amarlite. The industry will continue to prosper, I'm just not sure all the companies in it will. You can grow to fast and that's what happened to Arch.

Anonymous said...

Those banks are receiving our tax dollars and then finding every excuse not to lend and to take away credit and increase interest rates on those of us who DO pay their bills and don't mismanage. IF the small businesses could expand and pay their creditors (like Arch) they probably wouldn't have gone BK.

I hoped Barack's never having run a business wouldn't cause him trouble, but it obviously has. Not stimulating small business will be his downfall, I am very sorry to say.

"Elect me and I will bring the troops home", who was it that promised that on the campaign trail?

He is now part of the system that he pledged to change.

Anonymous said...

Will we ever see the day where a CEO of a failed company comes out publically and says: I failed to recognize changing market conditions, I failed to make the necessary changes to maintain adequate cashflow, I rolled the dice on growing too fast, I built up too much risk by not controlling my overhead or fixed cost? Instead we hear CEO's say "the banks wouldn't lend me more of their money to lose". Makes you wonder how new investors will step up after a bankruptcy and give a CEO with the same failed plan a second chance.

Anonymous said...

I agree with Mr./Ms. Third Anonymous. The banks would still lend money if borrowers didn't behave irresponsibly and paid back. All prospective borrowers are now suffering because a handful--granted, a monstrous handful--defaulted on payment.

And Mr./Ms. Fifth Anonymous, President Obama's doing exactly what he promised he'd do: Trying to get the forces out of Afghanistan as soon as possible. The 30,000 additional troops is only a TEMPORARY surge that is REQUIRED to prepare and make the Afghani government stable and secure to handle Al-Qaeda. The president is not pouring more money in a trillion-dollar war that was not needed in the first place.

It'll get worse before it gets better. Look at what President Obama inherited from his predecessor. Unfortunately, Obama's not a magician who's able to change things with the touch of a wand.

Anonymous said...

A couple of these comments are pretty disturbing. Companies and individuals need to take responsibility for their actions and behave in a fiscally responsible manner.

A bank will lend money if they believe it will be paid back on the agreed upon schedule. Maybe the banks would have worked with Arch if they had been more responsible.

To blame the President for all of this is ludicrous. 300+ million citizens are to blame for the economic issues - and now the Obama administration is trying to fix it.

Anonymous said...

Usually in these cases the unsecured creditors get completely hosed. In this case the big unsecured money is owed to the float companies whom Arch must get product from to continue operations. So the secured creditors will have to work with the unsecured or everybody loses everything. Can't imagine the family (especially the extended family) will survive this. The bankruptcy judge is the boss, and he/she will determine how this will play out.

Anonymous said...

Leon Silverstein has been walking down a very dangerous path for many years. He has operated his business on low margin, and marginal quality for many years as well. He mismanaged operations, sales money and every other aspect of Arch, to the point that it has long been the most hated company in the industry. This could not have happened to a more deserving individual. The unfortunate ones here are the creditors. This has nothing to do with Obama or anyone else but Leon.......

Anonymous said...

Jerry Wordhouse said:
Why are you all hiding behind anonymous? Stand up and be a man or woman. Blame Obama, and Bush who really haven't done anything for small business other than giving money to big banks and Corps. who won't share it with us. Blame Clinton, Chris Dodd and Barney Frank who wrote the Home recovery act and forced the banks to give mortgages to people who couldn't afford them with the lie that Fannymae and FreddieMac would insure them. The financial collapse came about 12 years later. The Free Market until we mess with it like they did for votes. Arch is just another casualty. Put a face on it and think of the poor employees.

Anonymous said...

Leon's Dad Bobby and his Grampa Sid Silverstein would be proud of what Leon and Arch have accomplished. The fact that the construction business is extremely volatile,has been and will be.
Putting idiots like Fannie May and Freddie Mac following Barnie Franks committments enticed folks without credit to assume debt without fear of repurcusions.
We the voters are allowing our elected offcials to micro-manage whatever they choose. LET'S STOP IT.
Too Leon and Arch, Best wishes for a prompt and full revitalisation.
John and Art Acker

Anonymous said...

When you have 100+million in debt and less than 100 million in assets you are overleveraged. Plain and simple. No one forced Arch to take on the debt regardless of how easy it was to borrow money. Barney Frank did not force the money into Arch's pockets, Arch asked for the money. A 20% decrease in sales does not cripple a company the size of Arch. Mismanagement of money is what gets you here.

Blame Obama, Fannie May, Freddie Mac, Barney Franks or whoever you want, its not their fault. Granted our government leaders are doing things that our children will affect our childrens lives as adults, but you still must manage your business and diversify as needed to survive. There are many of us struggling, there are many failing, but don't blame others for your failures. I am in the industry, I saw changes coming, I diversified and even though the economy is weak, I am surviving and surviving well. I diversified, I prepared for hard times. Leon should have done the same rather than trying to be the big dog doing it old school and burning bridges all the way.

somaie said...

Often we forget the little guy, the SMB, in our discussions of the comings and goings of the Internet marketing industry. Sure there are times like this when a report surfaces talking about their issues and concerns but, for the most part, we like to talk about big brands and how they do the Internet marketing thing well or not so well.

www.onlineuniversalwork.com

somaie said...

Often we forget the little guy, the SMB, in our discussions of the comings and goings of the Internet marketing industry. Sure there are times like this when a report surfaces talking about their issues and concerns but, for the most part, we like to talk about big brands and how they do the Internet marketing thing well or not so well.

www.onlineuniversalwork.com