HARTLAND, Maine — Prime Tanning-Hartland, a national leader in the processing of leather at its plant in Hartland, sought Chapter 11 bankruptcy protection Monday in U.S. Bankruptcy Court in Bangor.
Paul Larochelle, Prime’s president, told the Bangor Daily News on Tuesday that the process will allow the company to increase production volumes while maintaining its 178-person work force.
“We have a very strong work backlog here,” said Larochelle. “All efforts are being put into moving forward. Most of our employees have been through this with us before and I expect nothing but great teamwork and support. The restructuring will allow Prime to emerge as a lean and profitable standalone company.”
According to a press release issued by Prime Tanning on Tuesday, most of the company’s financial troubles stem from closure and litigation expenses associated with its former facilities in Berwick and Missouri. In 2007, the former Irving Tanning Co. merged with two other companies and over a course of years consolidated all of its operations in the small Somerset County town of Hartland.
The past debts, along with outstanding litigation, have made it difficult for Prime to finance its operations. As part of its reorganization, Prime has reached agreements with the Maine Rural Development Authority and a firm called Porter Capital to provide financing through the Chapter 11 procedure. That means the Hartland plant will remain open.
Robert Keach, an attorney with Bernstein Shur in Portland who is representing Prime through the bankruptcy, said Prime’s situation is different from some bankruptcy cases because of Prime’s profitability and the fact that it is in active talks with a major investor.
“Funding its residual liabilities has been a real drag on the company’s performance,” said Keach. “The good news is that the company has a substantial backlog of orders and good customers.”
Keach said he expects either a traditional reorganization of Prime’s debt or possibly a sale of the company “as a going concern” to another entity. A sale, if that’s what happens, could be complete within two months, he said. A reorganization would take longer.
At any rate, Keach said, Prime is in negotiations with a private equity firm that he declined to identify.
“What happens is really going to be dictated by what the people infusing the capital are going to require,” said Keach.
Prime Missouri, suffering from financial losses, sold its assets to National Beef Leathers in March 2009, according to the press release. Several lawsuits were filed against Prime Missouri for alleged injuries caused by Prime’s use of toxic chemicals. Though Prime Missouri denies the allegations, the legal fight has been expensive and has tied up in escrow some $1.5 million that otherwise would be paid to creditors, according to Keach.
Also contributing to Prime’s financial troubles was the closure of the company’s Berwick plant in 2008. The closure took longer than expected, and in the midst of the process Prime saw major increases in the costs of energy and chemicals, which absorbed some of the savings it was hoping to attain.
The company’s bankruptcy filing lists 24 pages of creditors, with 16 of them owed between $100,000 and $1.1 million. Five firms are owed more than $500,000. Prime listed its total liabilities as being between $1 million and $10 million, with its assets falling in the same range. Among the creditors were 33 firms based in Maine.
Irving Tanning Co. started operations in Hartland in 1936. Today, Prime Tanning has annual sales revenue of approximately $30 million.