The announcement of the administration proceedings on the 31 January came as a complete surprise, with no warning to employees, and has led to the closure of all of API’s UK operations in Livingston, Sheffield and Poynton and its head office in Manchester with the loss of hundreds of jobs.
According to owners Steel Partners Holdings, which fully acquired API in March 2015 (see HN March 2015), the purpose of API Group’s administration proceedings is to facilitate an orderly sale or wind-down of its UK operations. Bill Fejes, Steel Partners’ Chief Operating Officer said: ‘as previously disclosed, since early 2019, we have been working with the API Group businesses to assist in managing significant adverse change within their industries and the loss of major customers. Importantly, we expect that all our other business units will continue to operate as normal and will not be adversely impacted by the transition of the API Group.’
For the year ending 31 December 2018 API Group (which includes API Americas) had revenues of £124.6 million and an operating loss after exceptional items of £22.3 million. This compares to revenues of £147.1 million and an operating loss after exceptional items of £1.9 million for 2017.
In the US, Kansas-based API Americas filed for Chapter 11 protection on 2 February, listing $44.4 million (£31.1 million) of secured debt.
The API Americas business, originally founded as Dri-Print in New Jersey, comprises the headquarters and manufacturing facility in Lawrence, Kansas, as well as three leased distribution centres, located in Lawrence, Santa Fe Springs, California and Levittown, Pennsylvania.
Despite API Americas reducing staff numbers in December 2019, Chief Restructuring Officer Mitchell Gendel said in a first-day declaration document in support of the Chapter 11 proceedings, (viewed by Holography News®) that the circumstances leading to the bankruptcy were a result of the following:
- From 2016 to 2019, API Americas faced substantial deterioration in revenue and profitability as well as inconsistent quality and high scrap volumes.
- A significant drop in demand for products, due to unfavourable market dynamics and a shift toward more environmentally sustainable products. This is attributed largely to, the drop in demand of tobacco customers shifting to lower cost, alternative packaging. The company also faced competitive pressures due to overcapacity in the industry. This in turn, led to decreased free cash flow and operating losses.
- The company struggled to integrate different businesses after the consolidation of the Rahway, New Jersey facility into the Lawrence, Kansas facility. The consolidation of the Rahway facility resulted in a net investment of approximately $8 million and was followed by unforeseen expenses due to the relocation and start-up inefficiencies. As a result, the foils business unit declined by approximately $6 million from 2016 to 2019.
- The acquisition of the Hazen Osgood Laminates Plant required API Americas to make a one-time investment in capital projects. This was followed by unforeseen expenditures and adverse market conditions. As a result, the laminates business unit revenue declined by approximately $5 million from 2017 to 2019.
Gendel said the business requires ‘immediate access to liquidity to ensure that they are able to continue operating their businesses during these Chapter 11 cases, preserve the value of their estates for the benefit of all parties in interest, and administer a value-maximising Chapter 11 process’.