Liberty Fibers Corp. Closes Plant, Files For Bankruptcy Protection

 

Liberty Fibers Corporation has closed its plant in the Lowland area of Hamblen County and has filed for Chapter 11 protection with the U.S. Bankruptcy Court here.

Most of the plant's 340 workers have been laid off, according to Randy Alexander, president of Local 815T of the United Food and Commercial Workers Union, which represents the plant's more than 200 production employees.

He said the company's workers mainly come from Greene, Cocke and Hamblen counties, and estimated that more are from Greene and Cocke counties together than from Hamblen County.

The plant is located at 4901 Enka Highway in Hamblen County, close to Greene and Cocke counties and Interstate 81.

Most Liberty Fibers personnel are longtime employees. Their average age is 57, the union president said in an interview late Friday.

The local union leader said that he met with the company's executives for about a half-hour Friday morning and was informed that the plant had ceased operations "due to lack of work."

Asked whether the Liberty Fibers plant will reopen, Alexander said it is his understanding that the plant's reopening is only "a slight possibility."

Liberty Fibers is the sole manufacturer of rayon staple fibers in North America. End products using rayon include medical disposable, personal care, and feminine hygiene items, baby wipes, industrial and home furnishings, and apparel.

The Liberty Fibers plant has been facing stiff foreign price competition, according to Alexander and Tom Robinson, president of the chamber of commerce in Morristown, who were interviewed separately.

"Their profit margins have been very tight, and they have been for some time," Robinson said.

Alexander said that, unfortunately, it is his understanding that the Lowland plant produces "the highest-priced rayon fiber" of any plant in the world.

Company's Statement

Liberty Fibers executives could not be reached for comment Friday, although they were known to be in the plant.

The plant's main telephone was not receiving calls.

However, the company late Friday issued this written statement from Craig E. Barker, the company's president and CEO, saying that "late yesterday (Thursday), Liberty filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code . . ."

He further stated that an interim order was entered today (Friday) that secured post-petition financing with its (Liberty's) senior lender, LaSalle Business Credit (a Chicago company), to provide financing for the next four weeks.

"Liberty has since ceased all activities related to the rayon fiber production," the statement said.

"The employees have been informed that they have been laid off for an indefinite period, except for a small staff that will be retained to conduct clean-up, sell the remaining inventories, secure the fixed assets, and monitor environmental operations on the site."

Explaining why the plant has been closed, Barker's statement said, "Increased competition over the past six months in the global rayon fiber market resulted in a sharp increase in imports of rayon fiber from Asia and Europe into the North American market.

"The resulting loss of sales to its largest customers, in addition to the decline of sales margins, made it impossible for Liberty to cover its operating costs."

The company's statement concluded, "In the weeks ahead, Liberty will be evaluating strategic options for the business based on the forecasted future of the rayon fiber market in North America."

Legal Papers Filed

More than 200 pages of legal documents were filed late Thursday in Bankruptcy Court here on behalf of Liberty Fibers by Robert M. Bailey, a Knoxville attorney representing the company.

Liberty Fibers' legal papers tell the court, "The debtor (Liberty) does not have sufficient available sources of working capital and financing to carry on the operation of its business without the post-petition financing and the use of the lender's cash collateral.

"The ability of the debtor (Liberty) to maintain business relationships with its vendors and suppliers, to purchase new inventory and otherwise finance its operations, is essential to the debtor's continued viability."

An emergency motion filed by the company also said, "To successfully reorganize, the debtor needs to continue to operate its business and retain employees."

The motion continued that, as of Sept. 29, the estimated amount of total wages, employee benefits and taxes owed by Liberty Fibers is $490,428.70.

The motion added, "The money necessary to pay said wages will be provided to the debtor (Liberty) by LaSalle Business Credit LLC," the Chicago company.

Purchased In March

In March 2005, Lewis Hollingsworth, LP, an investment company in Dallas, bought the Liberty Fibers plant from Silva Acquisition Corporation, a Swiss equity group whose parent company was Silva Holdings Inc. The purchase price was not disclosed.

Liberty Fibers was reported at that time to have annual sales of about $100 million.

Previously, in June 2004, the Lowland plant had been sold to Silva Acquisition Corporation.

Barker then said, "The transaction value," including cash and payment of the company's debts, totaled "over $18 million."

Was Lenzing Fibers

For many years until late 2003, the Lowland facility was known as the Lenzing Fibers plant, its parent company then being Lenzing AG, of Austria.

When the plant changed its name in December 2003 to Liberty Fibers, it also filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court here.

The company said then, "This move, combined with the finalization of securing a new $10 million line of credit, will allow the company to restructure its remaining debt while finalizing the implementation of a series of cost-reduction measures."

With its purchase last spring by Lewis Hollingsworth, the Dallas company, Liberty Fibers was able to get out from under the court's Chapter 11 bankruptcy protection, and its executives were at the time hopeful about the plant's future.

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