Harper Brush bankruptcy nears critical ruling

FAIRFIELD -- The bankruptcy case of a 112-year-old, family-owned Fairfield company is reaching a critical point.

Harper Brush Works was in court last week defending its in-bankruptcy financing plan against its biggest creditor.

The iconic broom manufacturer filed for bankruptcy reorganization on May 29, struggling after the loss of business from Home Depot caused cash flow problems. It has since been stuck in what one case attorney called a "priming fight" with its largest creditor, UMB Bank of Kansas City.

Harper Brush sought credit terms from two other lenders to provide liquidity in bankruptcy after UMB Bank decided not to extend more credit.

UMB, already owed more than $5 million, doesn't think Harper Brush's assets warrant the additional borrowing. It is trying to fend off a maneuver by the company to obtain in-bankruptcy lenders, who would receive first priority for repayment in bankruptcy and relegate its debt to second place for recovery prioritization.

The fight has high stakes for the community of Fairfield, according to Mayor Ed Malloy, and not just because the city and the Fairfield Economic Development Development Association helped put together a $300,000 assistance package for the company in 2011 to convince it to close a plant in North Carolina and consolidate operations in Fairfield.

Harper Brush Works does business with about 132 vendors, some 44 of them in the Fairfield area. It also employs about 70 full-time workers, most of them in Fairfield, and a handful of part-time contract employees.

"These are American manufacturing jobs," Malloy said. "We think they are worth fighting for."

Malloy said discussions have been held locally with some potential investors in the company. He was hopeful the bankruptcy judge will grant more time for the company to come up with financing to allow the possibility for a sale or capital injection.

Bankruptcy Judge Anita Shodeen has indicated she could rule Friday on the debt financing objections.

The company is known for manufacturing brooms that outlast those of its competitors. It dates back to 1900, when founder A.K. Harper developed a brush set that included a sweeping brush, window washing brush, scrub brush and extension handle.

Harper Brush's unsecured creditors support the company getting new financing in bankruptcy but would like to see it on better terms for the company, said Richard Lauter of Chicago, an attorney for the unsecured creditors committee.

Lauter said it's rare in bankruptcy to see a "priming fight" between a debtor in bankruptcy and its main secured lender . He said the pre-filing lender more often decides to continue the lending relationship after the filing.

Harper Brush sales are way down from its peak of around $50 milliona year, but   Lauter likes the prospects for a sale or reorganization.

"It's not a high-tech business, but it seems like it would be a very good investment for somebody," Lauter said.

Harper Brush Chief Restructuring Officer Marc Ross said in May that the company has assets and liabilities of about $10 million. He said the company plans to eliminate production of less profitable products, but has every intention of continuing the popular products it is known for.

Malloy said a successful outcome to the case would be "a victory for America."