Print

Email story

Comment

Email editor

Anchor Glass is bankrupt again

The Tampa-based bottlemaker hopes to restructure its debts after filing for Chapter 11 protection for the third time.

By SCOTT BARANCIK
Published August 9, 2005

Anchor Glass Container Corp., a Tampa company that manufactures glass bottles for beverages including Yoo-Hoo and Budweiser, sought Chapter 11 bankruptcy protection Monday for the third time in a decade.

Trading was briefly halted Monday morning as Wall Street digested the news. By day's end, the price of a share of Anchor stock had fallen 43 percent to a low of 24 cents.

The filing was not unexpected. Anchor first raised the specter of bankruptcy three weeks ago. The company said in a July 18 news release that high energy costs had spoiled its finances and jeopardized a loan payment due Aug. 15. On Friday, the company confirmed it made accounting errors in financial statements as far back as 2001, two years before it went public at $16 a share.

Rob Soriano, a Carlton Fields lawyer representing Anchor, said the disclosures themselves caused "kind of a spiral" in which utility companies and other vendors, fearful of not getting paid, threatened to turn off the flow of raw materials.

"A lot of creditors put (Anchor) on C.O.D. (cash on demand) instead of normal 30-day payment terms," he said.

For much of the past week, Soriano and the rest of Anchor's growing legal team attempted to hammer out deals with lenders and vendors that would allow it to continue churning out bottles while nestled in bankruptcy's protective embrace.

On Monday, the team filed a series of related motions and addressed several of them in an emergency hearing before U.S. Bankruptcy Court Judge Alexander Paskay in Tampa.

Anchor's requests included the right to continue paying key parties, including its 2,800 employees and executives, its utility providers and the providers of sand, chemicals and other raw materials used to make glass containers.

The company also is seeking the right to restructure its debts. A key part of the recovery plan is to obtain $125-million in new loans from existing investors.

Soriano said more than 60 percent of Anchor's existing senior bondholders have already agreed to the infusion, provided they are placed first in line for repayment. Though details were still being worked out Monday afternoon, he said the first $15-million would likely be delivered Wednesday and that he was "very optimistic" the balance would become available within a month.

A large chunk of the new funds would be used to retire roughly $80-million owed on two lines of credi t.

Soriano said Anchor also hopes to negotiate new, more favorable contracts with key customers like Anheuser-Busch. The brewer accounted for 48 percent of Anchor's revenues last year. "There are several important contracts that parties resisted," he said, "but some of the larger customers have indicated they'll work with us."

Soriano said Anchor might reduce its production capacity down the road if the financial issues fall into place. The company has eight manufacturing plants, including one in Jacksonville.

In a July research note, JPMorgan Securities analyst Angela Levy wrote that Anchor's loan default was largely due to unique factors, including its relatively small scale, its minimal use of hedges against energy prices, and the fact that it does not manufacture wine bottles, for which demand has been strong. Levy suggested Anchor's top competitor, industry giant Owens-Illinois Inc. of Toledo, Ohio, is faring better despite today's rising energy costs.

Monday's bankruptcy filing may leave many Anchor shareholders empty-handed. Holders of common stock are among the last to get repaid in bankruptcies and frequently receive nothing in exchange for their shares.

Anchor's top shareholder, New York hedge fund Cerberus Capital Management, appears better off than others.

Though it owns nearly 60 percent of Anchor's stock, Cerberus - which bought Anchor out of bankruptcy in 2002 and took it public in 2003 - paid an average of just 34 cents per share, analyst Levy wrote.

And although Cerberus affiliate Madeleine L.L.C. is owed $15.4-million on a line of credit, Soriano said Anchor plans to repay 100 percent of the debt when it obtains its hoped-for $125-million infusion next month.

--Scott Barancik can be reached at barancik@sptimes.com or 727 893-8751.

[Last modified August 9, 2005, 01:22:12]