PLAN REORGANIZATION OF AMERICAN-LA FRANCE AND FOAMITE CORP.
Large Fire Apparatus Manufacturer Applies to Federal Court for Relief from Financial Burdens
IN a petition filed in the United States District Court November 15th, the American-La France and Foamite Corporation, of Elmira, N. Y., asked for permission to reorganize and revise its capital structure under Section 77-B of the Banruptcy Act. The petition, authorized by a resolution of the Board of Directors, was signed by Charles B. Rose as President.
Inability to meet maturing obligations, consisting chiefly of a semi-annual interest payment of $82,500 due December 1, 1934, on the $3,000,000 in 5 1/2% notes outstanding, was given as the reason for the corporation’s immediate difficulties. Leading up to this situation were heavy losses sustained in the commercial truck end of the business, coupled with the falling off of the volume of fire apparatus sales due to the depression. The motor fire apparatus business dropped from a total of $5,657,943 in 1926 to $592,228.27 in 1933, in line with the motor fire apparatus industry as a whole and parallel with the general decline in the production of durable goods. The total sales in all departments of the corporation totaled $2,466,837.50 in 1933. For the first six months of 1934, the earnings, before deducting depreciation and interest charges, were $95,012.14.
Following a hearing on November 30, Federal Judge Bondy issued an order continuing the corporation in charge of its affairs and authorizing it to continue the business, subject to the further order of the court, pending formulation of a plan of reorganization. It is expected that the new plan will be ready to submit about December 15. Under the present law, the consent of holders of 66 2/3% of the notes, and a majority of the preferred and common stock, is required to effect reorganization.
Following is a brief description of the corporation’s financial condition taken from the balance sheet of June 30, 1934, based on present book value.
In order to clarify the meaning of the proposed reorganization, Charles B. Rose, as President of the company, filed the following statement with the Code Authority of the Motor Fire Apparatus Industry, under date of December 1, 1934:
“As you know, the American-LaFrance and Foamite Corporation. on November 15th applied to the Federal Court for permission to reorganise their capital structure under Section 77-B of the Federal Corporate Reorganization Act. This action is not a Bankruptcy action in the old sense as some people have erroneously supposed—the erroneous impression perhaps being due to the fact that the Federal Corporate Reorganization Act is made a part of the Bankruptcy Act as an amendment thereto. The Corporate Reorganization amendment was passed at the last session of Congress to make possible capital reorganizations and allow corporations to adjust themselves to prevailing conditions.
“I think you will agree that this procedure is logical for corporations such as ours. Many corporations have already taken advantage of this Act, and undoubtedly many others will do so in order that they may readjust their capitalisation.
“The American-LaFrance and Foamite Corporation is not insolvent and in this case the facts will not permit any other finding than that the company is solvent.
“When the proposed reorganization has been completed—and we have every reason to believe that it will be consummated promptly—our company will be in a much sounder position than it has been at any time in many years. This reorganization applies to the Parent Company only, the AmericanLaFrance and Foamite Corporation, and does not affect the operations of its subsidiaries, namely. Ameriean-lgiFrance and Foamite Industries. Inc. (principal sales company) Amerlcan-LaFrance and Foamite Corporation. Pacific (Pacific Coast sales company) LaFrance Fire Engine and Foamite Limited (Canadian manufacturing and sales company) Foamite Firefoam Limited (European manufacturing and sales company).
“We are giving you this information in order that you may be in possession of the true facts in regard to this action.”
In addition to Mr. Rose, as President, the officers listed are: Wallace J. Childs. Executive Vice-President and Orley M. Cantor. Secretary-Treasurer. The Board of Directors consists of the three officers and the following: Paul Appenzellar, Alexander D. Falck, William L. Geddes, Clifford Hemphill, George W. Mixter and William E. Ransom. Mr. Geddes is President and Mr. Ransom Vice-President of the MacAndrews & Forbes Company of New York, the largest holder of the American-La France and Foamite notes and also of the preferred and common stock. Mr. Childs, who was President of the old Foamite-Childs Corporation before it was bought over by the present organization in 1927, is also one of the large holders of preferred stock, and Mr. Falck, who is Chairman of the Board of the Corning Glass Works of Corning, N. Y., and resides in Elmira, owns or controls a substantial amount of the notes and preferred stock.