Three Reasons Given for Heads & Threads Receivership

4/25/2011
HEADLINES
Three Reasons Given for Heads & Threads Receivership

Importer Heads & Threads International was forced into receivership for three reasons: the recession, a “new” competitor and excess product demand.
 

“The financial situation of HTI deteriorated due to the severe recession that impacted the U.S. economy combined with the entrance of a new competitor  and excess product availability throughout the industry,” according to the Notice of Assignment for the Benefit of Creditors sent out by company’s appointed trustee-assignee Patrick D. Cavanaugh of Chicago-based High Ridge Partners.
 

“These conditions severely limited HTI’s ability to generate sufficient cash flow to meet its obligations as they become due,” the March 21, 2011, notice states.
 

HTI completed a trust agreement on March 15 “at the specific direction of the management and officers.”
 

The liquidation portion of the notice reads: “HTI is indebted to numerous creditors and is unable to pay its debts as they become due. HTI is desirous of providing for the payment of its debts, so far as it is possible, by an assignment of all the assets for that purpose.”
 

“The trustee-assignee will attempt to collect the remaining receivables, sell the business assets, oversee the liquidation efforts, and pay all reasonable expenses in connection with the execution and administration of this assignment from the proceeds of such efforts.”
 

On February 14, 2011, word spread quickly through the fastener industry that HTI had gone into receivership with $16 million in debt.
 

But according to the assignment notice, HTI’s liabilities are substantially higher than that.
 

“Based on the assignee’s initial review of documents, it would appear that there are liens on all the assets of HTI,” according to the notice.
 

The book value of HTI’s assets totaled $39.39 million, while its liabilities reached $35.91 million, leaving a “net worth” of $3.48 million, according to the notice.
 

The notice lists HTI’s assets $14.15 million in accounts receivable; $24.57 million in inventory; and $670,000 in furniture, fixtures and equipment. Intangible assets were listed as “unknown” and cash was listed by a dash indicating “zero”.
 

HTI’s liabilities include $13.27 million in secured loans; $377,000 in reclamation claims; $305,000 in accrued employee wage/vacation claims; $161,000 in customer credits; $14.34 million in accounts payable; $1.25 million in accrued expenses; a promissory note valued at $6.07 million; and $131,000 in personal property taxes. Both lease termination expenses and employee severances were listed as “unknown.”
 

The notice stipulates that the financial information was complied from the books and records of HTI and was not audited or reviewed.
 

“The asset values are represented by the book values on the company’s books and records and are not intended to represent liquidation values,” which are “unknown,” according to the notice.
 

As GlobalFastenerNews.com first reported on February 14, there were reports that dozens of employees had already been laid off, including CEO Michael Wrenn – although he and other company executives remain pictured on the company website.

 

More than six weeks later neither HTI officials nor Greenwich, CT-based Capital Partners have responded to requests for information. As of April 4 there was no message from management on the HTI website.

 

“I am not at liberty to respond,” was one high-ranking employee’s only comment.

 

While the industry waits for information from HTI, rumors are escalating about fulfilling contracts and upcoming “surplus pricing.”

 

Customers told GlobalFastenerNews.com that HTI salespeople are saying that if there isn’t a buyer by April that Heads & Threads will shut down.

 

“Interesting times now to say the least,” responded one competitor.

 

Another competitor, former HTI vice president Dan Long, now with Factory Direct Logistics, began actively soliciting Heads & Threads customers in March. 
 

In 2010, Heads & Threads launched a new division – Socket Screw Supply – to expand in socket products.
 

Creditors have until June 21, 2011, to submit their claims. Questions are being directed to Frank Wojtowicz or Mike Dudek of High Ridge Partners. Tel: 312 456-5636 Fax 312 456-5630
 

Assignee Patrick Cavanaugh listed his attorney as Peter J. Young of the Chicago law firm Proskauer Rose LLP.
 

As of the beginning of 2011, HTI was led by CEO/president Michael Wrenn; CFO and vice president for finance Fred Weber; vice president for operations and transportation Jim MacWilliams; and vice president of materials Ruth Dowling.
 

Officially HTI is a master distributor and importer with a product list of 14,000 items. HTI has distribution centers in Atlanta (Lithia Springs, GA), Dallas (Grand Prairie, TX), Los Angeles (Pico Rivera, CA), and New Jersey (Sayreville), as well as sales offices in Cleveland, Houston, Miami, Seattle and Tampa. HTI is headquartered at 785 Center Ave., Carol Stream, IL 60188. Tel: 732 727-5800 Web: headsandthreads.com  ©2011 GlobalFastenerNews.com

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Related Links:

• HTI