BOARDMAN American Paper files for protection from bankruptcy

American Paper officials expect a new owner to keep the Boardman plants and employees.
THE VINDICATOR, YOUNGSTOWN
By DON SHILLING
VINDICATOR BUSINESS EDITOR
BOARDMAN -- A Boardman company that's the country's largest maker of church envelopes filed for bankruptcy protection and expects the business to be sold quickly.
A new buyer is expected to retain American Paper Group's Boardman plants and all jobs except those in senior management, said Thomas Pietrocini, company chairman and chief executive.
The company employs 350 hourly and salaried workers at plants on Southern Boulevard and McClurg Road.
Pietrocini said after a hearing Thursday in U.S. Bankruptcy Court in Youngstown that seven companies are bidding on American Paper. The three most serious bidders include a maker of church bulletins, a maker of religious cards and an investment company.
American Paper could select a lead bidder as early as today, he said. An auction of the company would be scheduled once that selection is made.
Chances of moving operations
Pietrocini said he doesn't think the winning bidder will have any reason to move operations.
"No buyer is asking to relocate. No buyer is asking not to deal with the union. We've asked those questions," he said.
Kim Telford, who represents 109 workers as president of Local 638 of the Graphics Communication International Union, said she is confident the jobs will remain.
The company recently added 45 jobs in Boardman because it closed a plant in Richmond, Va., to save money and consolidate operations.
American Paper hired a sale adviser in June and wanted to sell the company outside of bankruptcy court. Potential buyers didn't want to be responsible for leases of closed plants in Richmond and Tucson, Ariz., so American Paper filed for bankruptcy protection Wednesday, Pietrocini said.
Court proceedings also will allow the new owner to be free of American Paper's debt, which should allow it to invest in the business, he said.
Debt issues
John Kostelnik, a Cleveland lawyer representing American Paper, told Judge William Bodoh that the company has heavy debt and defaulted on a loan agreement last year with Heller Financial of Chicago, its primary lender.
Pietrocini said the Richmond operations took a $200,000 loss in the fourth quarter last year.
The company is much stronger now that the Richmond plant's equipment has been moved to Boardman, he said. The company will have about a $3 million profit this year after expenses related to the closing, but that should increase to about $6 million next year, he said.
While the company is making money, it isn't a high enough profit for its debt, he said.
Kostelnik said the company owes $34 million to Heller, $10 million to another lender and about $2 million to unsecured creditors.
Pietrocini said he expects the sale of the Boardman operations to bring between $15 million and $20 million.
Heller will lose money, but Pietrocini said he is most disappointed for the company's unsecured creditors, smaller companies who provide goods and services to American Paper. These companies won't be paid for claims filed before the bankruptcy filing unless Heller recovers all of its money.
Pietrocini, who came to the company two years ago, said American Paper accumulated high debt because the company has been bought by investment companies four times in recent years. Debt mounted each time, he said.
The debt problem grew when previous senior management spent $10 million to develop a line of other church products, he said. That effort has since ended.
American Paper has 40 percent of the church envelope market and serves 40,000 churches.
The company is owned by Bruckmann, Rosser, Sherrill & amp; Co., a New York investment company. American Paper was founded by three local residents in 1916 in East Liverpool and moved to Boardman in 1957.
shilling@vindy.com