Register, or Login to view the article
October 22, 2018 – Privately held Welded Construction and 1 affiliated Debtor (“Welded Construction” or the “Company”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 18-12378 [Docket No.1]. The Company, a mainline pipeline construction contractor headquartered in Perrysburg, Ohio, is represented by Sean M. Beach of Young Conaway Stargatt & Taylor. Further engagements include the retention of Frank Pometti, a Zolfo Cooper Managing Director, as Chief Restructuring Officer. According to documents filed with the Court, the Company has between 200 and 1,000 creditors; estimated assets of approximately $265 million; and estimated liabilities of approximately $240 million.
Sudden Liquidity Crisis
In his declaration in support of the Chapter 11 filing [Docket No. 4], Mr. Pometti cites the sudden decision of a major customer (The Williams Companies or “Williams”) to withhold a large payment, and the ensuing concern of further customers as to the viability of their own projects when that fact became public, as creating the liquidity crisis that triggered the Company’s need for bankruptcy protection. Mr. Pometti states, “On October 4, 2018, Williams unexpectedly withheld $23,563,538.00 from a payment to the Debtors for the Williams/ASR Project, and filed a lawsuit (the ‘Williams Complaint’) against the Debtors that same day…asserting breach of contract….The Debtors vigorously dispute the allegations contained in the Williams Complaint…. The filing of the Williams Complaint was quickly made public to the market and Customers became increasingly concerned about how the payment of receivables would be utilized by the Debtors. In particular, Customers sought assurance that any new payables would be solely deployed toward expenses related to their particular Projects. As such, these discussions were unsuccessful, depriving the Debtors of the necessary liquidity to sustain their business operations outside of chapter 11 and absent negotiated arrangements with their Customers, as discussed immediately below.”
Chapter 11 Provides Breathing Room to Complete Projects
Mr. Pometti’s declaration also notes that the immediate purpose of the Company’s Chapter 11 filing is to provide the breathing room necessary to reassure customers as to their own projects with the Company and arrive at consensual arrangements which will allow for the completion of those projects. Mr. Pometti continues, “It is critical that the Debtors reach acceptable agreements with the Customers on a project-by-project basis to fund ongoing construction and related costs, while satisfying the claims of vendors that have the ability to put mechanics liens on the Projects or otherwise are critical to ongoing Project construction….The chapter 11 process affords the Debtors the ability to reach these arrangements and seek the necessary Court approval to provide Customers with the relief they are requiring to continue to fund the Projects.”
The Company, which had gross revenues of over $1 billion for the 12 month period ended September 30, 2108, further disclosed that it had negotiated debtor-in-possession (“DIP”) financing “consisting of entirely new money from North American Pipeline Equipment Company, LLC (the ‘DIP Lender’), an entity under common ownership with the partners of Debtor Welded Construction, L.P., to allow the Debtors the time, breathing spell, and resources necessary to continue discussions with their Customers so as to negotiate arrangements to finalize the Debtors’ ongoing Projects with them.”
Welded Construction has two general partners and two limited partners. The general partners are Ohio Welded Company LLC (owner of 15 partnership units) and McCaig Welded GP, LLC (owner of 5 partnership units). The limited partners are Bechtel Oil, Gas and Chemicals, Inc. (owner of 735 partnership units) and McCaig US Holdings, Inc. (245 partnership units). The entity is overseen by a five-member board of managers.
Read more Bankruptcy News