| Since 1843, they've been making sugar in Sugar Land.
In 1906, the cane milling operation became known as the Imperial Sugar
Co., and it now calls itself the oldest company in Texas doing business at
its original site.
To stay in business, the company on Tuesday filed for Chapter 11
bankruptcy protection.
A combination of sagging prices for refined sugar and the expense of
its heavy debt load forced the Sugar Land company -- the nation's largest
processor and marketer of refined sugar -- into federal court.
"Over the past 15 to 18 months the domestic sugar market has seen
an unprecedented decrease in prices for refined sugar and an increase in
the cost for the raw material," said Mark Huggins, Imperial's chief
financial officer.
"As a result, margins for refiners and producers have been
squeezed considerably. In addition Imperial Sugar had a high level of debt
on its balance sheet. The company was caught in a squeeze of significantly
lower profits which have to service such a high level of debt."
The company has cited high energy prices as another reason for the
increase in company costs. Imperial is active in California, where energy
prices are steep.
Some industry watchers see a worldwide sugar surplus as a major cause
of Imperial's financial trouble. Sugar is produced in more than 100
countries.
Imperial Sugar has pre-negotiated a consensual arrangement with banks
and bondholders that, Huggins maintained, will give the company enhanced
financial strength to compete in the domestic sugar industry.
The company sells sugar nationally under the Imperial, Dixie Crystals,
Spreckels, Pioneer, Holly, Diamond Crystal and Wholesome Sweeteners
brands.
Imperial's funded debt as of September 2000 was $456.4 million. Under
the reorganization, $250 million of that debt is being converted into
shares of common stock.
Wasserstein Perella & Co. has been retained to assist the company
in its financial restructuring and reorganization.
Current holders of the notes and other creditors will receive 98
percent of the common stock in a restructured entity. Shareholders will
receive 2 percent and seven-year warrants to purchase an additional 10
percent of the restructured company.
"The elimination of $250 million of debt will (enhance) the
financial and competitive strength of the company (and) we expect no
disruptions to our operations" during reorganization, said Imperial
Sugar Chief Executive James C. Kempner in a written statement.
The company has diversified into the food service business in recent
years. In November 1998, Imperial acquired Diamond Crystal Brands, makers
of a variety of packets, including sugar, salt and pepper, as well as
nutritional supplement products for nursing homes. Food services currently
account for slightly more than 20 percent of the company's total revenues
of $1.8 billion.
Bill Schwer, executive vice president of Imperial, said he is hopeful
the company will keep its management.
"As far as we know, the intention is that current management will
stay in place and that includes the Kempners," Schwer said. Kempner
family interests acquired the company in 1906.
"We do not expect any disruptions in operation, and that would
include the employee base," Schwer said. "As always, we will
continue to evaluate our cost structure and utilization of resources.
"Our hopes are that operations in Sugar Land and our other
locations will continue to operate as they had immediately prior to the
filing."
Explaining the timing of the Chapter 11 filing, Huggins said that
previous wavers granted by Imperial's senior lenders expired Sunday and
the 30-day grace period also expired that day for the payment of $12.2
million in interest on the senior subordinated notes, which was scheduled
but not paid on Dec. 15.
"Our most significant creditors -- the banks and bondholders --
agreed with the company that this was the most appropriate time for the
company to seek relief under Chapter 11," Huggins said. "To that
end the company's proposed plan of reorganization has been pre-negotiated
with those lenders."
In 1988, Imperial Sugar acquired publicly held Holly Sugar Corp., a
beet processor, which doubled Imperial's size and made it a marketer of
both cane and beet sugar. |