Bankrupt Mexmil Reorganizes
By RAJIV VYAS
Santa Ana-based Mexmil Co. is set to emerge from bankruptcy with a cash infusion, new ownership and a pledge to repay its creditors in full.
The aerospace supplier’s bankruptcy plan is contingent on Beverly Hills-based The 180 & #351; Group LLC and Los Angeles-based TriYar Capital LLC investing more than $11 million for about a 60% stake in Mexmil. With the infusion of new capital, Mexmil says it will repay its creditors in full,including interest. The current owners,members of the Molus family,will own the remaining 40% or so of the company.
“We couldn’t be happier,” said Robert Opera, partner at Newport Beach-based bankruptcy and reorganization law firm Winthrop Couchot Professional Corp., which represented Mexmil in the bankruptcy proceedings.
“It is not unusual for creditors to obtain little or no recovery in a bankruptcy case,” Opera said. “Here, they get 100 cents on the dollar,” plus interest, he said.
Mexmil owes $8 million to California Bank & Trust Inc., its only secured creditor. It also owes more than $6.5 million to trade creditors and $7 million to The Boeing Co.,the company’s largest customer.
“The bank will be paid in full,” said Penelope Parmes, partner and head of the financial practices group at Costa Mesa law firm Rutan & Tucker LLP, who represented California Bank & Trust.
Trade creditors are expected to be paid in full once the reorganization plan is completed in the next month or so, while Boeing will be paid over the next 12 months or so.
Mexmil makes insulation material for the aerospace industry. The company’s corporate headquarters is in Santa Ana and it has a warehouse in Calexico and a manufacturing plant across the border in Mexicali, Mexico.
The company filed for bankruptcy in February, citing escalating costs, margin pressure and overall cash flow problems.
“It was not able to repay its lender,” Opera said. He said that the company also was unable to pay its accounts payable or trade creditors, which jeopardized Mexmil’s existence as an ongoing company.
The recession, aerospace industry woes and the Sept. 11 terrorist attacks combined to slice into Mexmil’s sales.
Charges have also been raised about company mismanagement and payments made to Molus family members. California Bank & Trust, for instance, has charged in court documents that Mexmil loaned Carol Molus, one of the company’s owners, more than $1.5 million, none of which has been repaid. The bank alleged that Molus was drawing a salary and bonus of about $750,000 a year despite the outstanding loan.
Until 2000, Mexmil was mainly supplying insulating blankets to original equipment makers such as Boeing. The company then looked to develop new products in other markets.
“It was probably a good business decision to expand their customer base,” said Rutan’s Parmes. “But they underestimated the R & D; expenditure and costs involved in penetrating a new market plus the time it would take to bring in new business.”
In November, California Bank & Trust realized that the company was facing cash flow problems.
The bank sought an injunction to rein in Mexmil’s spending.
“They fought us (on the injunction) and we won,” Parmes said. Mexmil filed for bankruptcy protection in February.
The company submitted a restructuring proposal to U.S. Bankruptcy Judge John E. Ryan, who supervised Orange County’s bankruptcy proceedings in the mid-1990s.
“There was substantial hostility from the bank initially and then from the (creditors) committee,” Opera said.
Boeing, which buys more than 50% of Mexmil’s products and has an exclusive purchase agreement with the company until 2004, objected to the confirmation of Mexmil’s reorganization plan.
Despite Boeing’s concerns, Mexmil’s plan of reorganization was confirmed on Aug. 29.
Opera said the company has trimmed its expenses by $14 million and is profitable.
For her part, Parmes said that she had to fight tooth and nail to get the bank repaid every cent on the dollar plus interest and attorneys’ fees.
If Mexmil fails to close the funding,expected by mid-September,the court has already approved a sale of the company’s assets, Parmes said.
