By CARL E. FEATHER - Lifestyle Editor - cfeather@starbeacon.com
Star Beacon
Sat, May 17 2008
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Growth Partnership for Ashtabula calls the sale of NEO Plastics to RTS Companies of Canada a “win-win situation” for RTS Companies (U.S.) Inc. and Ashtabula County.
Windy Porter of Mega Plastics in Ravenna calls it something else.
“I think it stinks,” says Porter, co-owner of the 10-employee plastics pigments firm. “It’s not (a win-win) for the people (NEO) owned money to. They lied.”
Mega Plastics is one of dozens unsecured creditors far behind the primary, secured lienholder, National City Bank, which held cognovit promissory notes and cognovit guaranties that provided a fast track to judgment.
NEO filed for Chapter 11 bankruptcy protection in February 2007; the action was dismissed in October. Skutch Co. of Toledo was retained as receiver to find a buyer for NEO’s real estate and equipment.
Christopher Parker, Toledo attorney for the receiver, says that, based upon an investigation that was conducted prior to the sale, RTS’ offer of $880,000 was more than what could have been realized in a public distress sale of the company.
A court hearing to receive any objections to the sale had been scheduled for Wednesday but was postponed.
Only back real-estate taxes and National City Bank, by virtue of its secured position, will receive payment from the sale. Even so, the Cleveland bank will stand to lose a substantial portion of its investment.
In a news release from Growth Partnership, Mike Panayi was identified as an RTS partner. The Star Beacon’s calls to RTS’ Panayi in Waterloo, Ontario, were not returned.
According to the GP news release, GP made the deal possible.
“I think it is a given that RTS Companies (U.S.) Inc. would not be there if it had not been for the Growth Partnership team,” the GP release quotes from Panayi’s letter. “We would have walked away from the acquisition of the land, building and equipment at 2900 Industrial Road (sic) long ago had it not been for GP’s continuous involvement on a daily basis, most times several times a day,” the release said.
According to court documents, RTS is paying $550,000 for the real estate and $330,000 for the personal property of the business. According to the Ashtabula County Auditor’s Web site, the property at 2900 Industrial Park Drive, Austinburg, has a taxed market value of $1,079,900.
Founded by Jeffrey Dunne in 1996, NEO Plastics is a rotational molding company, one of two plastics firms in the county to offer this type of molding. Its products include agricultural tanks, playground equipment, bumpers and pop displays, according to the Web site (www.neoplasticsinc.com).
The fledgling company quickly caught the attention of Growth Partnership, which in 2001 declared it a “Best of the County” at GP’s annual awards banquet.
In a Star Beacon story that ran in conjunction with the celebration, GP’s executive director Joseph Mayernick praised NEO as “a cool little company” with great growth potential.
Local tax abatement authorities also had high hopes for NEO and granted a 60 percent personal-property and 60 percent real-estate abatements for five years. In 1999, that amounted to nearly $17,000.
The abatement terms required NEO create 20 new jobs in its first year; subsequent reviews showed that the company achieved and often exceeded that goal. GP’s news release claims 19 jobs were saved.
A notation on one of the review forms notes “$9 per hour.” A source familiar with the operation said the company did not provide health-care benefits to its employees.
The company’s bankruptcy filing shows Dunne received a monthly salary of $8,000 and his mother, Charlotte, $1,280 monthly. C.J. Dunne, an officer, was paid $4,200 monthly.
Dunne did not return the Star Beacon’s calls.
The Ashtabula County Auditor’s Web site shows a delinquency of $47,135.82. Parker said all delinquent and current taxes will be paid from the proceeds.
NEO also obtained a loan through the county’s revolving loan fund, the 503 Corporation, which was paid off as part of a refinancing package through a commercial lender. NEO Plastics eventually ended up with a loan from National City Bank, which was owed $1,484,096 plus interest, when the bankruptcy was filed in February 2007.
Court records show that the reason for NEO’s difficulties was the loss of two major customers. These documents also show Growth Partnership was involved in helping the company as early as 2006, when National City Bank was seeking action on its judgment. A court document filed in that case states that “Attorney Stavole (representing NEO) reported that Joe Mayernick, of the Growth Partnership, has been working with investors that have some interest in investing in the Defendant and possibly taking out Plaintiff (National City).”
RTS was NEO’s major customer and had its tooling on site. As such, RTS had a significant stake in continuing operations here and avoiding a possible loss of product supply resulting from a court-forced sale. According to the GP news release, RTS has been producing items in Austinburg for more than a month.
GP went to bat for RTS by placing a display ad in the Star Beacon in February, advertising for a production manager to head up RTS’ anticipated Austinburg operation.
GP’s news release states RTS has, with the acquisition of NEO, opened its first U.S. plant in Austinburg. However, according to the company Web site (rtsplastics.com), the company already owns a U.S. fabrication/distribution center in Kennesaw, Ga.
Porter says the loss will hurt their small business. “It is money we will never see,” she says. “We’re not happy about it.
Some of the other unsecured debtors and amounts included Amerada Hess, $46,542; CEI Illuminating, $14,113; Dominion East Ohio, $36,541; Moeller, $97,602; PolyOne, $69,750; Shealy Group, $38,596; and Wheeler (Stow), $20,553.
“Nobody is going to get what is owned to them,” Porter says. “The new buyer claims no debt from them. They are just buying the business.”
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