“We’re going to emerge like the Phoenix of mythology,” said Bill Hinz, the president of American LaFrance, the day after the company’s latest filing for Chapter 11 bankruptcy protection.
It was clear that Hinz was unaware how many times that analogy has been applied to his company in the past.
This the fourth bankruptcy filing involving ALF since 1934. In fact in the 1980s and early ’90s, there actually was an American LaFrance Phoenix Society whose goal was to save and perpetuate existing examples of the company’s early apparatus.
American LaFrance truly has been the modern incarnation of the ancient Greek mythical firebird, who in its last days of life, builds a nest of cinnamon tree twigs, then ignites it. As flames consume the nest and the bird, there arises from the ashes a new, young Phoenix firebird of bright red and gold plumage to fly away and carry on the cycle.
This latest bankruptcy may well be the best planned and consciously executed firebird dance since Russian composer Igor Stravinsky wrote The Firebird suite ballet in 1910.
Not unlike master choreographer George Balanchine’s 1949 American production of The Firebird for the New York City Ballet, this move by American LaFrance’s principal owner Lynn Tilton may indeed make her reputation among the masters of stagecraft in the Balanchine mode.
And that’s no small accomplishment.
Whether Tilton, Hinz and their assembled cast of attorneys and accountants can pull it off with the grace and success of a world-class ballet performance is yet to be seen. But the fact that they have launched the effort is, itself, remarkable.
A Chapter 11 bankruptcy under federal law is best described as a “time-out-to-review-the-plan” move whereby a company throws a red flag on the field and the referee goes to the sideline to view the play. Nothing happens – the creditors can’t sue and the company can’t continue to play ball until the court (referee) gives approval.
It’s a way of putting everything on hold pending a judge’s review of how the company proposes to proceed while balancing the interests of all participants, suppliers and customers.
This bankruptcy filing, if Hinz’ explanation is substantiated by fact over the next few months, could launch a rebirth of American LaFrance that’s no less spectacular than a red and gold feathered bird arising from ashes.
Ms. Tilton and American LaFrance have major differences with Freightliner, LLC, the unit of Daimler-Benz that sold her American LaFrance in December 2005. Their differences involve representations at the time of sale.
In late December 2007, Freightliner filed suit against the various enterprises through which Ms. Tilton controls American LaFrance. Hinz said that in turn prevented her (and her investment companies) from putting more cash into the fire apparatus manufacturer, lest it be tied up in the Freightliner lawsuit.
Entering from stage right, Ms. Tilton next brought on the nationwide experts on dealing with such matters, Corporate Revitalization Group Partners (CRG) of New York City.
Their plan to salvage the $150 million Ms. Tilton, et al. have already invested in ALF, appears nothing short of the brilliant score written by Stravinsky nearly 100 years ago.
Since Tilton & Company (if you will allow that as a reference to her various investment entities for the sake of brevity) is ALF’s largest creditor she is in the driver’s seat. Most of her investments in ALF were advanced as loans so when it comes to presenting a reorganization proposal to the federal Bankruptcy Court judge, her voice is likely to get much more attention than supplier creditors owed but a few million.
However, ALF President Hinz said his conference calls to some 22 major creditor suppliers went well once he told them where ALF was now headed and that an infusion of $50 million in new money was just ahead.
Tilton has appointed William K. Snyder, a CRG managing partner, to represent her interests as “chief restructuring officer” of the “debtor in possession” of American LaFrance. Snyder is well known to the courts by reputation as a successful solution negotiator.
As inducement for the federal court and other creditors to agree that all creditors will be best served by the CRG prepared restructuring plan, Hinz said Tilton has pledged that ALF will receive another $50 million loan as early as the first week in February.
That large chunk of cash – and any further needed investments – may be out of reach of the creditors, since it will be coming in under court supervision in connection with resolving the bankruptcy reorganization. The result, Hinz said, is American LaFrance can continue to operate without worrying about litigation between ALF and Freightliner.
But, just to cover all bases, CRG has also filed a Section 363 motion that would request the court’s permission to sell the company assets should the reorganization plan not be approved. This is characterized by Hinz as a safety net move.
Should anything slow down court approval of the reorganization plan, Tilton & Company will still be the largest post-bankruptcy creditor due to the new $50 million loan. Consequently, should anyone else – such as Freightliner – consider bidding for ALF at a court authorized sale, Hinz said they would have to start at the $50 million level just to pay off Tilton’s court-approved loan.
While the lawyers and restructuring experts have been working the legal machinery, Bill Hinz and the employees at ALF have been proving that the proposed manufacturing systems to be presented to the court will actually work.
Hinz and his crew has carefully documented the step-by-step construction of a custom pumper built from scratch and delivered within 90 days at the existing plant with present employees.
They actually built a new American LaFrance Liberty and are prepared to demonstrate to the court’s satisfaction that Hinz’s plan to put manufacturing back on track and on schedule will work.
It is one thing for a company to go before a bankruptcy judge with a plan on paper that says, “this is how we’re going to fix the company.” But it’s something else to show a video of a brand new custom pumper and say, “We built this in 90 days – less than half the time we propose to turn out apparatus using new systems and procedures at the newest and most modern truck manufacturing plant in the country.”
Under the law, all creditors will get a chance to file motions and to vote on the final reorganization plan. At this point Hinz – speaking for management and as the president appointed last October by Lynn Tilton – said, “this new working capital will infuse oxygen into the company and we will take care of our suppliers, our customers and our employees.”
He also predicted that ALF will emerge from the bankruptcy within 60 to 90 days.
“I am 99 percent certain that the bankruptcy court will accept our reorganization plan, our budget for 2008 and the total system we have proposed for this company,” he said. “I am absolutely certain this is the way to go to put this company on a six-month production cycle and continue to produce the highest quality fire apparatus. My reputation and integrity are at stake here.”
Of course all of Hinz’s predictions and plans are subject to approval of the judge, as well as the creditors. While the scenario is well planned, anything can – and often does – happen in the courtroom.