BY ROBERT P. MADER Of CONTRACTOR’s staff
ROUND ROCK, TEXAS — American Plumbing & Mechanical Inc. announced in mid-October that it filed petitions under Chapter 11 of the U.S. Bankruptcy Code and the company intends to implement a restructuring plan.
AMPAM was listed as the seventh largest mechanical contractor in the country in CONTRACTOR’s 2003 Book of Giants with revenues of $574.85 million (May, pg. 39).
AMPAM also announced that it has negotiated a financial restructuring plan with its senior lenders and other major constituents that will reduce the debt on its balance sheet and strengthen the company’s overall financial condition. The company said it intended to file a plan of reorganization within 30 days, which would be mid-November.
The proposed financial plan will restructure the terms of the company’s senior debt obligations and convert all the company’s subordinated debt into preferred stock. These changes to the capital structure will significantly reduce annual cash interest payments.
As part of the filing process, AMPAM said that it had arranged debtor in possession financing commitments for both working capital and bonding requirements.
“These capital structure improvements will significantly reduce our total indebtedness and improve our financial stability,” said Robert Christianson, chairman and CEO. “In addition, this restructuring plan will enable AMPAM to operate with minimal disruption to our employees, customers and vendors. ... The filing under Chapter 11 is the way these things are done and taking this step positions us to successfully conclude the restructuring process in the most expedited manner possible.”
Two days after the filing, AMPAM announced that the U.S. Bankruptcy Court for the Western District of Texas, San Antonio Division, approved all the company’s first-day motions. The relief requested by the motions was intended to give AMPAM the ability to support its customers, employees, vendors and other business partners. Among the first-day motions, the company requested the authority to obtain interim financing, the use of cash collateral and to maintain existing cash management systems.
The most important approval was for immediate use of the proceeds of the debtor-in-possession financing and cash collateral, giving the company cash for working capital, collateralizing surety bonds and general corporate needs.
When AMPAM was formed four years ago, its game plan was to eventually go public. That never came to pass as the economy and capital markets soured and some of its commercial contracting operations lost money.
AMPAM listed 25 subsidiary companies in the bankruptcy filing. Some are contractors, such as AMPAM RCR Cos. or AMPAM Parks Mechanical, and some are not, such as AMPAM Holdings LLC.
The company cannot say, at this point, if any of them are up for sale.
“AMPAM’s primary purpose for filing bankruptcy is to alleviate the financial strain imposed as a result of our current corporate capital structure in a quick and efficient manner,” Robert Nagel, executive vice president, told CONTRACTOR. “It is important to note that our businesses are solid and continue to generate positive cash flow from operations. Prior to submitting our proposed restructuring plan to the bankruptcy court, AMPAM will fully evaluate all their options to ensure we are delivering optimal value to our stakeholders. As a result, we recently sold two of our businesses not meeting our expectations. These operations are AMPAM Commercial Midwest based in Ohio and AMPAM North Carolina, a single-family plumbing operation in Charlotte. Until our proposed restructuring plan has been presented and approved by the bankruptcy court, the future sale of other AMPAM operations is merely speculative. The company plans to submit the restructuring plan in the near future.”
AMPAM today is mainly residential.
AMPAM Commercial Sherwood Mechanical Inc. in Poway, Calif., is the company’s only remaining commercial operation, Nagel said. He noted that Sherwood remains an important component of the business and continues to receive the full support of the organization. Nevertheless, the company is in the process of evaluating all its options relating to each of its business operations, including Sherwood, Nagel said.
“Going forward AMPAM will concentrate on its core strengths — residential plumbing, heating, ventilation and air conditioning, contracting specifically in the area of single-family and multifamily residential new construction,” he said.
AMPAM lays claim to being the largest company in the United States focused primarily on residential plumbing, HVAC and mechanical installation services, with much of its work in the residential new construction market. It also serves commercial construction customers. The company employs more than 5,300 people in 31 locations and performs work in 18 states.
“The company anticipates that the restructuring will have minimal impact on our core businesses, and we do not envision any type of company-wide layoffs,” Nagel said. “AMPAM is in the service business and our employees are and will continue to be our biggest asset.”