After shutting down its Bowling Green operations, DESA Holdings has filed for Chapter 11 bankruptcy.
The company filed a voluntary petition for bankruptcy Monday in the U.S. Bankruptcy Court of Delaware. Five other DESA units also filed for bankruptcy, including DESA Heating and DESA Specialty, both of which are in Bowling Green. DESA FMI, which operates facilities in Alabama and California, also filed bankruptcy.
DESA filed bankruptcy about two weeks after the company announced the closure of its Bowling Green facilities, leaving hundreds jobless.
“Like most companies given the current economic climate, the company has recently been experiencing financial difficulties,” Craig Dean, DESA’s chief restructuring officer, said in a letter to Bowling Green Mayor Elaine Walker dated Dec. 16. “The company has now been advised that its lenders are unwilling to provide additional funds, leading to this notice and notice to the company’s employees of the possibility of job loss.”
DESA officials have repeatedly declined to speak about the situation.
In the bankruptcy petition, DESA Holdings listed $126.8 million of debt and more than $132 million in assets.
The company recently pitched a strategy to its lenders that would give DESA enough finances to keep its doors open. But the lenders did not accept the strategy, freezing the company’s operational funds and ultimately resulting in mass layoffs and bankruptcy, according to the letter.
But Chapter 11 bankruptcy does not mean the company will permanently close its doors. Chapter 11 would allow DESA to restructure debt and reorganize the company so it can continue operations, said Richard Cantrell, professor emeritus of economics at Western Kentucky University.
“I think Chapter 11 bankruptcy is certainly not a death sentence,” he said. “It’s sort of a clear playing field so you can pursue business plans and see if it can work.”
Several companies emerge from Chapter 11 filings as viable businesses, he said.
In fact, DESA Holdings filed Chapter 11 bankruptcy in 2002. In the past five months, the company, which manufactures electric lawn and garden tools and heating products, had announced plans to add a total of 500 new jobs at the Bowling Green plant.
About 400 jobs were brought back to Bowling Green in June after having been outsourced to China, and 100 new jobs were announced in September when the company decided to move its power tools division from Manchester, Tenn., to Bowling Green. For many, the recent layoffs and plant closures were abrupt and shocking.
According to the bankruptcy filing, DESA is “continuing in possession of their property and are operating and managing their business as debtors in possession.”
As the company works to restructure its operations, the Bowling Green plant has the best chance of reopening, Cantrell said.
“I would say within a time frame of three to six months, a successful Chapter 11 bankruptcy can reopen and start,” he said.
And, even though negative news recently surrounded the company, Cantrell said the Chapter 11 filing might be a favorable sign for DESA.
“I’m more optimistic since (I was told) it filed Chapter 11,” he said. “They can come back and become an economic player.”