GRAND RAPIDS, MI - Rowe International Inc. has announced the filing of a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. According to Rowe chairman and chief executive officer J. Douglas Johnson, the action was taken to facilitate the sale of the company while moving forward with its product development, manufacturing and marketing activities.
Johnson explained that the filing was made necessary by the company's excessive secured debt load of more than $80 million, with a maturity date of December 31, 2003.
American businesses have made increasing use of creditor-supported Chapter 11 filings in order to restructure debt, Johnson added. "Chapter 11 can be an effective instrument for companies whose troubles derive from crippling capital structures, but whose fundamental businesses are sound and well managed," he said. "This is certainly the case with Rowe, which, in spite of its enormous debt load, has always shown a profit before interest was applied. And this is a positive step for Rowe after more than 13 years of burdensome debt."
In its filings in the U.S. Bankruptcy Court for the Western District of Michigan, Rowe indicated that it had reached an agreement with Alexander Enterprises, Inc., an affiliate of Alpha Private Equity Group. Alexander Enterprises will serve as a "stalking horse" bidder for substantially all of the company's assets, subject to court approval and higher bids through the Bankruptcy Court auction process.
To fund ongoing operations during this sale process, Rowe has announced an accord with JPMorgan Chase Bank, which acts as the agent bank for Rowe's pre-petition senior secured lenders. Subject to court approval, JPMorgan Chase will use the company's cash collateral, including cash on hand, collections of outstanding receivables and work in progress.
Rowe also has secured additional debtor-in-possession financing to further fund its ongoing operations until the sale is consummated. This DIP financing facility also is subject to approval of the Bankruptcy Court.
Rowe filed a variety of first-day motions in the Bankruptcy Court in Grand Rapids, to support its employees in Michigan and Texas, as well as 350 vendors, its customers and stakeholders.These motions include requests to honor the company's pre-petition obligations to its employees; to approve certain sale procedures in order to facilitate sale of virtually all the company's assets to the highest and best bidder; to retain legal, financial and other professional services in support of Rowe's reorganization and the sale of its assets; and for other relief.
The agreement with JPMorgan Chase Bank for the use of cash collateral and the DIP facility will enable Rowe to pay its employees, vendors, suppliers and other business partners under normal terms for good and services provided during the reorganization and sale, the company explained.
Johnson emphasized that Rowe will continue with its aggressive product development program during reorganization. "In the first half of this year, Rowe's upside potential from its new products began to manifest itself," he reported. "We completed our client/server system to support a digital entertainment network for international jukebox markets. We made major upgrades to our currency changer lines, and divested our declining vending business.
"Rowe has very bright business prospects," Johnson added, and these have not gone unnoticed by potential buyers. "More than 30 companies took a close look at Rowe and, to date, the company has received five offers including the one accepted by the company from Alexander Enterprises."
In the months ahead, Rowe will work with its secured lenders, trade creditors, employee groups and other stakeholders to develop a plan of reorganization that will establish the company's future direction. Rowe plans to look at every aspect of its operations, and to make the necessary changes to maintain its market leadership.
"By restructuring our finances and establishing new ownership, we are creating a flexible business environment in which Rowe's management, marketing and engineering teams can compete more effectively," Johnson told VT. "The reorganization process will permit Rowe to reform, move forward and ultimately flourish. It will enable us to continue to innovate for Rowe operators, providing them with the technology that will allow their businesses to grow and prosper in the highly competitive location-based digital entertainment marketplace."
The final hearing, and approval of the sale of the company, is expected at the end of October.
Rowe International Inc. is the oldest and largest manufacturer of audio compact disc and Internet-enabled digital jukeboxes,with an estimated 60% share of the domestic and international jukebox market. It also ranks as the number two manufacturer of bill changers for the coin-operated vending, car wash and laundry industries. Rowe has manufacturing facilities in Grand Rapids, MI and Rockwall, TX.The company's legal counsel with respect to the Chapter 11 filing and sale is Miller, Johnson, Snell & Cummiskey, PLC. Serving as investment banker to assist the company during the sale process is Northstar Industries Inc. (Minneapolis, MN).