Volume 10, Issue 3 - May/June 2008
Kingston, Pa.-based Diamond Glass filed a voluntary petition for reorganization under chapter 11 of the U.S. Bankruptcy Code on April 1. The company filed with a “debtor-in-possession financing commitment” by its senior secured lender Guggenheim Corporate Funding LLC to provide necessary liquidity during the chapter 11 process. In addition, in the filing, Diamond requested that the Bankruptcy Court approve a sale to Guggenheim (or its designee) and an auction process to permit other interested buyers to out-bid Guggenheim’s proposal.
Despite the filing, Diamond president Bill Cogswell appeared optimistic during an interview with AGRR magazine/glassBYTEs.com™ on April 1, the official day of the filing.
“We’re doing well—we’re healthy, and it’s our desire to continue to move forward and look forward and continue to invest in what will make the company healthy,” he said.
However, he doesn’t shy away from speaking about what led to the restructuring.
“Our situation is clearly a result of the bonds that we owe from 1998 and the debt that we owe to a creditor facility from about a year ago,” he says.
Cogswell declined to comment on what led to the debt—particularly as to whether market conditions are a factor.
“I don’t know that what we face today [with the current economy] has anything to do with whether you can make money in the industry today,” he says. “Our situation today is that we have a lot of debt and we can’t pay it. There [have] been a lot of industry changes over the years—pressures from pricing, for example—that have been on everybody’s minds. But again, at the end of the day, we can’t pay the debt.”
Cogswell notes that the company explored many options in recent months, but this one seemed optimal. “We considered all of the options available and this seemed to be the best course of action,” he says. “There’s always hope that you’re going to be able to work through a process with those you owe money to. We started reaching out to bondholders and creditors a few months ago and tried to engage in dialogue.”
As for current Diamond vendors, Cogswell says it’s up to the court to decide by what method these will be paid.
“That’s a process that’s really governed by the courts,” he says. “I can’t tell you with certainty what that process will be.” Cogswell says he spent the evening of March 31 on conference calls with district and regional managers, and then distributed information on the restructuring to employees this morning. From 8:30 a.m. on, the company held three different, back-to-back town hall-type meetings at its corporate headquarters in Kingston, Pa. That afternoon, another conference call with district managers and regional managers followed.
“[We] responded to any questions they’d had come up with [since the first correspondence],” Cogswell says. Company officials also distributed a list of frequently asked questions to employees to allay their concerns. “At the end of the day, [most employees] are concerned as to whether they’re paychecks are going to be cashed,” he says. He adds, though, that this shouldn’t be a concern—with the court’s acceptance of the company’s initial motion for restructuring.
In the future, though, Diamond management expects even more questions to be generated among employees. “They might now have all their questions to day,” Cogswell says. “It’s important that we continue to reach out and make sure we’re available to answer them. We think we’ve done a pretty good job of attempting to proactively communicate.” On April 2, the court approved all of Diamond’s original motions. The sale of the company was expected to occur in June 2008.
“It’s gone—dead,” says Rep. Steve Kirby (D-Wash.), who introduced the bill originally in the house, “but it’ll be back next year.”On February 26, a hearing was held before the Senate Financial Institutions and Insurance Committee regarding the bill, which ultimately led to its demise. Insurers came out in full protest against the bill, calling it “anti-consumer” and referring to its restrictions as a “gag order.”
Kirby had advised AGRR magazine/glassBYTEs.com™ that the bill’s fate in the Senate, though, wasn’t surprising.
“Legislation that regulates the insurance industry usually fares better in the House than in the Senate,” he said. “It is a strategy for the insurance industry to let things happen in the house and wait for them in the Senate and beat them down there.”
He also said the insurance industry’s opposition to the bill is characteristic of the insurer group’s recent activities in Washington regarding legislation that involves them.
“I believe the insurance industry has drawn a line in the sand in the state of Washington and will fight to the death with every piece of legislation that attempts to regulate them in any way,” he said.
“At its core, this bill presents a huge problems in that it prevents insurers from communicating to its insureds the services and rights that they have paid for,” said Mel Sorenson, speaking on behalf of the Property and Casualty Insurance Association of America, during the February hearing.
A Belron US/Safelite representative, Dan Coyne, also was in attendance to speak out against the bill.
“If enacted, this bill would effectively be a gag order,” he said.
However, the bill, which arose from work conducted by the Washington Independent Auto Glass Association and Seattle-based All Star Glass, also met lots of support from the auto glass industry with assistance from the Independent Glass Association, who insisted it’s not meant to be a gag order.
“It is not our intent in any shape or form to gag the insurers,” said Lisa Thatcher, speaking on behalf of All Star Glass.
Pam Shearer of Auto Glass Plus also spoke.
“What this bill is about is third-party administrators who also own glass shops whose language does interfere with a consumer’s right to choose,” she told the committee. “The language they use is, ‘Unless you instruct me otherwise, I’d like you to use a particular shop.’”