Newton Files Chapter 11, Sells Assets To HALO
To Sell Assets To HALO
As first reported in a Breaking News Alert yesterday, Top 40 distributor Newton Manufacturing Company (asi/283300) has filed for Chapter 11 bankruptcy protection in U.S. Federal Court in Des Moines, IA. The filing also includes a court motion to sell nearly all of Newton’s assets to fellow Top 40 distributor HALO Branded Solutions (asi/356000). Both parties have signed the definitive agreement, although the court action could also include potential competitive bidding. The transaction between Newton and HALO, though, is expected to be an expedited sale that will take place within 30 days.
“We have explored several options to resolve the difficult financial environment we have operated under for several months,” said Mancil Laidig, Newton’s president. “It became clear that our greatest assets – the Newton sales force and the loyal team that supports them – would be best served with a Chapter 11 filing.”
Laidig further said that HALO bought out the position of Newton’s senior, secured lender and has agreed to provide Debtor In Possession (DIP) financing. “This financing will assure all Newton orders that are shipped and billed from today forward will be paid in the normal course of business,” he said. “The confidence this will provide our suppliers in filling our orders will have an immediate and positive impact on our ability to serve the Newton sales force and their customers.”
Laidig also sent a letter to suppliers yesterday that said the company was still trying to recover from a computer system conversion that began last year. “As a key supplier to Newton, you know that we have experienced financial difficulties for the past several months related in large part to the system conversion we completed in 2014,” said Laidig in the letter, which was obtained by Counselor. “We have struggled to sustain our financial commitments and have been searching for the best possible outcome for our sales force and for suppliers like you who have been supportive of our efforts over these past many decades.”
The solution to these financial concerns, Laidig said, would partly be solved through its transaction with HALO. It’s a deal for HALO that will provide access to an increased client base and new sales force. “We have reviewed Newton’s financial performance with their team and their financial advisors for quite some time. We felt we could provide a meaningful value for their business that would allow them to apply much of the proceeds to pre-filing liabilities,” said Marc Simon, CEO of HALO. “Our goal is to retain value in Newton’s business during this transition in order to provide a great home for their loyal sales force, opportunities at HALO for many of their experienced support staff, and as much payment on pre-filing liabilities as possible to our valued suppliers.”