Pretty Products, LLC (“Pretty Products” or the “Debtor”) filed a petition on June 15, 2010 in the Bankruptcy Court for the Northern District of Georgia (case number 10-12286) for relief under Chapter 11 of Title 11 of the United States Code. The case has been assigned to Judge W. Homer Drake. The bankruptcy petition was signed by John Hawkins as Chief Financial Officer of the Debtor. The Debtor’s bankruptcy counsel is G. Frank Nason, IV of the firm of Lamberth, Cifelli, Stokes, Ellis & Nason, P.A. of Atlanta, Georgia.

Background of the Debtor

Pretty Products is headquartered in LaGrange, Georgia.  Pretty Products motion for approval of debtor in possession financing:

The Debtor is a manufacturer of floor mats for vehicles with headquarters and a 200,000 square foot manufacturing facility located at 1513 Redding Drive, LaGrange, GA 30240 (the “Facility”). The Facility employs sixteen (16) salaried employees and one-hundred sixteen (116) hourly employees. The real property and improvements on which the Facility is located are owned by Cambridge Real Estate Holdings, LLC (“Cambridge”), which is an affiliated entity.

The Debtor identifies three remaining automotive OEM customers – Honda, Toyota, and Subaru.  The Debtor also identifies Chrysler and General Motors as former customers “who refused to increase their prices to address the negative margins inherent in the arrangement.”  At the time of these two automaker bankruptcy filings in the summer of 2009, “they owed the Debtor over $1.2 million.”

The Debtor has had a substantial decline in sales since 2008.  In that year, the Debtor generated annual sales of $50 million as compared to the current revenues of approximately $18-$20 million per year.  As a result of the downturn the Debtor closed down its Ohio and Tennessee facilities.

In addition to the loss of 2 major customers, the Debtor attributes its decline to “the unusually high gasoline costs in 2007 and 2008 destroyed the company’s margins on its profitable products [and] the general downturn in the economy … .”

Secured Debt Picture

As is typical when an automotive supplier experiences such a dramatic drop in sales, the secured debt picture of Pretty Products is not pretty.   The Debtor’s primary secured lender is Synovus Bank, formerly known as Columbus Bank and Trust Company ( “Synovus”).  The total secured debt owed to Synovus is approximately $13,209,000.  The proposed order submitted with the debtor in possession financing order, includes the following:  “The Debtor has represented to CB&T and the Court that at present, the value of the Pre-Petition Collateral is less than the amount of the Pre-Petition Debt, such representation being without prejudice to CB&T’s right to seek a revaluation of such values in connection with the financing contemplated hereby or otherwise.”

Although Synovus is providing the debtor in possession financing, the Debtor is being kept on a short leash.  The post-petition facility is limited to a mere “$500,000 outstanding at any one time subject to the aggregate outstanding principal balance of the entire Credit Line not exceeding the sum of $12,000,000.”  The Credit Line is already at $11,935,000.

A Surprising List of Top 20 Unsecured Creditors

The petition’s “Statistical/Administrative Information” estimates that there are from 200-999 creditors, the Debtor has assets of $1,000,001 to $10,000,000 and liabilities of $10,000,001 to $50 Million.

The list of the top 20 unsecured creditor is surprising.  First, the size of the trade debt is owed to certain creditors is astounding for a supplier with annual sales below $20 million.  Second, the appearance of ADP, Inc. on the list at more than $160,000 is remarkable.  There is certainly a story behind this as ADP’s normal practices simply would not let this occur.

Name of creditor and complete mailing address including zip code Nature of claim (trade debt, bank loan, government contract, etc.) Indicate if claim is contingent, unliquidated, disputed, or subject to setoff Amount of claim [if secured, also state value of security]
UBE MACHINERY INC
DEPT 77562
PO BOX 77000
DETRIOT, MI 48277-0562
BUSINESS VENDOR $917,750.00
RIETER AUTOMOTIVE
38555 HILLS TECH DR
FARMINGTON HILLS, MI 48331
BUSINESS VENDOR $693,037.23
DORSETT INDUSTRIES, L.P.
1304 MAY ST
P O BOX 805
DALTON, GA 30722
BUSINESS VENDOR $599,437.93
BWC STATE INSURANCE FUND
CORPORATE PROCESSING DEPT.
COLUMBUS, OH 43271-0977
BUSINESS VENDOR $507,069.78
NGR-NEXT GENERATION RECYCLING MASCHINEN GmbH
GEWERBEPARK 22
FELDKIRCHEN, AUSTRIA A-4101
BUSINESS VENDOR $418,301.00
GOLD KEY PROCESSING, INC
14910 MADISON RD
MIDDLEFIELD, OH 44062
BUSINESS VENDOR $392,450.62
KRAIBURG TPE CORP
2625 N BERKELEY LAKE RD
DULUTH, GA 30096
BUSINESS VENDOR $281,400.91
VI-CHEM CORPORATION
55 COTTAGE GROVE, SW
GRAND RAPIDS, MI 49507-1646
BUSINESS VENDOR $265,175.42
INTRUST TRANSPORTATION
1247 EAST MAIN ST
COSHOCTON, OH 43812
BUSINESS VENDOR to setoff $217,972.43
CAMBRIDGE REAL ESTATE HOLDINGS
1513 REDDING DR
LAGRANGE, GA 30240
BUSINESS VENDOR $184,996.75
CITY OF LAGRANGE
P O BOX 430
LAGANGE, GA 30241
$172,696.80
ADP, INC
PO BOX 9001006
LOUISVILLE, KY 40290-1006
BUSINESS VENDOR $160,857.09
IAC ATTN: TERRY SHANK
50 SPRING ROAD
CARLISLE, PA 17013
BUSINESS VENDOR $149,562.59
TRADEMARK PLASTICS CORPORATION
P O BOX 15292
NEWARK, NJ 07192
BUSINESS VENDOR $125,156.00
ENTEC POLYMERS LLC
1900 SUMMIT TOWER BLVD #900
ORLANDO, FL 32810
BUSINESS VENDOR $118,660.25
WELLS FARGO INS AGENCY OF MI
4000 TOWN CENTER STE 800
SOUTHFIELD, MI 48075
BUSINESS VENDOR $115,216.00
DOEREN MAYHEW & CO., PC
755 WEST BIG BEAVER RD #2300
TROY, MI 48084-0231
BUSINESS VENDOR $97,764.00
LYLE INDUSTRIES, INC.(PPI)
1800 KIMBERLY PARK DR
P O BOX 44 DALTON, GA 30722
BUSINESS VENDOR $89,147.43
ERGON INC
P O BOX 1569
JACKSON, MS 3921 5-1 569
BUSINESS VENDOR $86,694.20
AMCOR INC
192 QUALITY DR
THOMSON, GA 30824
BUSINESS VENDOR $85,123.92

The Top Pretty Products List does not include: (1) persons who come within the definition of “insider”; or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.

The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.

Objective of the Bankruptcy – Unknown

Based on the initial filings, it is not possible to predict the direction of this bankruptcy.  The automotive sector an especially hostile environment for a troubled supplier.  Resourcing by customers is always the biggest fear and the departure of one customer can have a cascading effect – no customer purchasing department wants to be the last out the door.

The case deserves close attention and we have added the Pretty Products docket to our courtesy DocSheets reports.