Special to CONTRACTOR
HOUSTON — It’s all over except for some of the paper shuffling and the company that used to be Encompass Services is already referring to itself as the Residential Services Group.
Encompass Services Corp. announced in mid-May that it had entered into an asset purchase agreement, whereby substantially all the assets of the company’s Residential Services Group would be sold to Residential Acquisition Corp., a company formed by Wellspring Capital Management. The new company will be a residential plumbing and HVAC contractor based in Dayton, Ohio, and operating in nine states.
The corporate entity that was Encompass Services will ultimately be liquidated.
The commercial businesses have already been sold off individually, with the last sale taking place May 7.
The residential operations were sold for $40 million, plus the assumption of certain related liabilities. According to Dow Jones Newswires, the money would go into the pot to pay creditors. General unsecured creditors, owed $745 million, would get 6% of their money, Dow Jones said. A group of banks, which reached a credit agreement with Encompass before it filed for bankruptcy last year, would get about 43% of its money.
Encompass and its applicable subsidiaries entered into the asset purchase agreement with the approval of the U.S. Bankruptcy Court for the Southern District of Texas having jurisdiction over the company’s and its subsidiaries’ jointly administered Chapter 11 cases.
The current management team of the company’s Residential Services Group, led by Eric Salzer, will remain with the business. The new company will specialize in installing and servicing HVAC and plumbing systems in newly constructed and existing homes.
“This is an important step in Residential Services Group’s emergence,” Salzer said. “We are on schedule towards our objective of a completed transition to a stand-alone company by early summer. With the conclusion of the bankruptcy process, we look forward to focusing our efforts on operations and securing new business. We’d like to thank our customers and employees who have been so supportive during this trying period.”
Michael F. Gries, chief restructuring officer of Encompass Services, added: “We are pleased to announce this final phase of our restructuring is coming to a close. With the sale of our Residential Services Group the company will have made significant progress with its restructuring efforts in a short period of time. We have sold substantially all of the company’s operating businesses as ongoing enterprises and will seek confirmation of our plan of reorganization this month.”
Residential Service Group will provide HVAC, plumbing and other contracting services primarily in single-family, low-rise multifamily housing units and small commercial buildings. Its services will include new installation and maintenance, repair and replacement work. The firm will have 2,300 employees.
Wellspring Capital Management is a New York-based private equity firm. The firm acquires companies where it can realize value by contributing management expertise, operating and financing strategies and capital.
Encompass Services Corp. ranked No. 2 in CONTRACTOR’s 2003 Book of Giants with $1.4 billion in revenue (May, pg. 38).