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The distributor of Sigg bottles in the United States has filed for Chapter 11 bankruptcy, but proposes to continue operations by selling itself to its Canadian counterpart.
Stamford, Conn.-based Sigg Switzerland (USA) Inc. filed Chapter 11 reorganization plans May 20 with the District of Connecticut’s U.S. Bankruptcy Court. The company claims nearly $2.3 million in assets and about $13 million in liabilities.
The mounting liabilities are a result of the company’s financial struggles since 2009, after revelation that Sigg’s previous aluminum bottles, and others, contained trace amounts of the chemical bisphenol A (BPA), when consumers thought the products were BPA free. SNEWS broke the story on Aug. 19, 2009, followed by an open letter from Sigg CEO Steve Wasik the next day.
Eight class-action lawsuits, later combined, were filed against Sigg, including claims of misrepresentation, breach of warranty and violation of consumer protection laws.
The lead attorney for the lawsuit, Michael Caddell of Houston, Texas-based Caddell & Chapman P.C., could not be reached for comment as of press time, June 1, 2011.
Following the publicity and lawsuits, sales of the Sigg bottles “declined heavily” and the company “lost millions” in 2009 and 2010, officials stated in the bankruptcy filing, obtained by SNEWS. In addition, Sigg USA lost money by voluntarily exchanging more than 306,000 bottles at no cost to the customer, the court documents claim.
As of mid May, Sigg USA owed about $9.3 million to its parent Swiss company Sigg Switzerland AG, nearly $2.1 million to secured creditor New York-based Gerber Finance Inc., $118,000 to secured creditor Capacity LLC and about $1.64 million to unsecured creditors. The company also lists about $51,000 of priority unsecured debt for salaries and taxes.
To reorganize the company and regain financial footing, Sigg USA proposes selling itself to Sigg Products Canada Inc. for about $2.35 million, subject to higher and better bids. Both distributors are owned by the parent company and are headed by the same president, Rob Dewar.
Such action taken by companies is known as a stalking horse bid, setting a bar for any competing bids, although Sigg isn’t necessarily calling for any.
Sigg’s proposal to the bankruptcy court has the approval of its lead secured creditor Gerber, which pledges to extend its financing of $2.3 million to the company, if the deal goes through by July 19, 2011. In addition, parent company Sigg Switzerland AG will agree to subordinate its priority debt to below that of unsecured creditors.
Sigg claims the proposed deal is the best offer on the table to exit bankruptcy. No objections or counter bids have been filed with the court as of June 1, 2011.
SNEWS will continue to follow the case.
— David Clucas