Baldwin-United Corp. filed for protection under Chapter 11 of the bankruptcy law yesterday after a group of creditors torpedoed the company's attempt to reorganize its $1 billion in debt outside court.
But Victor Palmieri, president of the Cincinnati-based company, said that negotiations held with creditors over the past few months would ease the task of restructuring the company under the court's protection.
"The time that we've bought in the past four or five months . . . is really going to make a difference," Palmieri said in an interview. "We bought enough time to meet our basic objectives."
Palmieri said those objectives included giving various state regulators enough time to work out rehabilitation plans for the company's insurance subsidiaries; forming relationships with creditors to lessen the adversarial aspects of the bankruptcy proceeding, and making preparations to sell MGIC Investment Corp., a Baldwin-United subsidiary that is the nation's leading insurer of home mortgages. Insurance policies issued by Baldwin-United are not affected by the bankruptcy proceedings.
Although its origins were as a maker of pianos, Baldwin-United in recent years was one of the nation's fastest-growing financial services firms, but its aggressive acquisition policy proved expensive. The company lost $617 million in the first quarter, and Palmieri, a corporate crisis-management specialist, was brought in to run it last May.
The Chapter 11 filing in New York yesterday came minutes after a group of three creditors went to court in Cincinnati to put the company into involuntary bankruptcy proceedings. One of the creditors filing the Cincinnati action was William A Niskanen Jr., a member of the president's Council of Economic Advisers, who is owed $46,000, according to court documents.
The filings took place after the breakdown of talks among creditors attempting to grant another extension to repayment of the company's $1 billion debt. The repayment schedule had been extended twice before, and the latest extension was to expire Sept. 30. A small group of creditors--representing less than $10 million of debt, according to Palmieri--balked, however.
Under bankruptcy proceedings, Baldwin-United will now continue its restructuring, protected from creditor lawsuits by the court and with certain procedures expedited under court supervision. Restructuring steps can be ordered by the court, without the unanimous creditor approval required in an out-of-court reorganization.
Palmieri said the reorganization of the company would take several years.