By Patrick Cronin
Hampton Union, Friday, Septembert 30, 2005
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- Foss Manufacturing, which filed for Chapter 11 bankruptcy protection on Sept. 16 amid allegations of fraud, is moving closer to selling the company.
Boston lawyer Andrew Schwartz, who is representing the company, said Foss plans to hire an investment banker to solicit offers for a possible sale.
He added the company has already had inquiries from potential buyers.
The privately held company, which employs 370 people and makes engineered fibers and fiber solutions, filed for bankruptcy after the company's primary lender, CapitalSource Finance LLC, refused to fund the company's day-to-day operations.
The lender stopped payments after it was discovered that Foss was providing misleading information over the last several months that led CapitalSource to overadvance millions of dollars to the company.
Foss Manufacturing admitted that information given to the finance company was incorrect but put the blame on former CEO and President Stephen Foss, who was asked to resign by the board of directors after it came to light.
On Sept. 26, Bankruptcy Court Judge Mark Vaughn agreed to allow the company to continue using cash collateral to fund the operations. CapitalSource, which was originally against the move, agreed to it after a deal was worked out between both parties.
Foss will be allowed to spend the cash but it must keep to a budget it proposed to the court for the next five weeks. In addition, the company must pay CapitalSource $251,000.
The judge also agreed to allow Foss to hire Frank Eaton of Variety Auctions to appraise all of the company's equipment.
According to the bankruptcy filing, the company estimated assets of $10 million to $50 million and estimated debts in the same range.
The town of Hampton is on the list of the 20 largest unsecured creditors. The company owes the town $116,579 in back property taxes.
On Monday night, Selectman Rick Griffin asked Town Manager James Barrington if Foss's bankruptcy filing means the company will not be paying the taxes they owe.
Barrington said the town is right behind the IRS as a priority to be paid with the bankruptcy laws and it is his understanding that Foss plans to pay the taxes in October.
"Foss has always been a good corporate citizen and they have always paid their taxes," said Barrington.