Irving Tanning files for Chapter 11
Irving Tanning, one of the US’s largest tanning companies, last week filed for Chapter 11 bankruptcy protection under the strain of mounting cash flow and raw material supply problems.
Chapter 11 of the Bankruptcy Code is designed to provide companies with the ‘breathing space’ they need to reorganise through the restructuring of their debts, or new investment capital. As part of its reorganisation proposal, Irving Tanning has reached an agreement with its lenders, Fleet Bank and Peoples Heritage Bank, regarding continuing working capital financing. Though the company says no significant layoffs will result from the reorganisation, approximately 20 staff have already been made redundant as part of separate cost-cutting measure. Irving Tanning’s plant in Hartland, Maine, will remain in operation while the company reorganises.
Irving Tanning’s senior management attributes the company’s problems to the current global shortage of hides, and the consequent increase in hide prices. The company says market conditions have precluded it from passing on these higher prices to its customers, with the result that margins have been seriously eroded. Other factors include the continuously declining state of the US footwear manufacturing sector - which now only accounts for 3% of the home market - and ‘significant increases’ in healthcare, electricity and fuel costs.
"The mounting losses at Irving led to a withdrawal of credit support by the company’s senior lenders, leading the company to default on payments to suppliers. The company also faced possible termination of critical contracts. The company was left with no choice but to seek relief under Chapter 11 in order to continue its turnaround plans and to insure fair treatment of all creditors," said Robert J. Keach, a bankruptcy attorney with Bernstein, Shur, Sawyer & Nelson, which is acting on behalf of IrvingTanning.
"Recent shifts in the market, resulting in increased prices for leather sold by the company, support Irving’s prospects for reorganisation. In addition, aggressive cost-cutting, along with restructuring of the company’s long-term debt, should return the long-standing company to profitability," Keach added.
Irving Tanning started operations in Hartland in 1936 and today employs around 385 people at the Hartland site. The company is a global supplier of leather for the footwear, accessories and upholstery markets with international sales accounting for approximately 50% of its production in Hartland. Irving has annual sales of approximately $100 million.
