Warren Electric Files for Bankruptcy Protection, Continues Restructuring Plan

Warren Electric Group, Houston, has filed for protection under the U.S. Bankruptcy Code after its lead lender chose not to continue its support of the company's out-of-court efforts to reorganize the company.

“We had hoped to complete our turnaround plan to reorganize Warren Electric without seeking temporary protection,” said Cheryl L. Thompson Draper, chairman, president and chief executive officer of Warren Electric. “Unfortunately, with the economic pressures on lenders, our current bank group has been unwilling to continue to support our out-of-court efforts to reorganize the company. We are very close to having all the necessary pieces in place to complete our restructuring plan. We were disappointed by the actions of our current lender, Bank of America. We plan to be in and out of the Chapter 11 process very quickly as we finalize and execute our recapitalization plan.”

The company, one of the 20 largest electrical distributors in the United States, had hired a turnaround specialist, Randy Patterson, earlier this year to help reorganize the proud, family-owned distributorship. Warren Electric was founded in 1919, but began to establish its place in the industry in 1942 when the legendary J.R. Thompson and his wife opened the company's first branch in Houston.

The turnaround plan included layoffs, consolidating and selling off branch locations. As part of the company-wide restructuring plan, Warren Electric in July sold eight branch locations in the north and central part of Texas to The Reynolds Co., Dallas. Under the terms of the agreement, Reynolds agreed to purchase certain assets and/or assume lease obligations in Dallas, Longview, Paris, San Antonio, Sherman, Tyler, Wichita Falls and Waco. The Dallas operations were merged with Reynold's existing facility in Dallas and gave Reynolds exclusive rights to the Allen-Bradley franchise in Dallas.

Thompson-Draper said that by Warren Electric seeking protection, the company would be able to provide access to new capital during the final stages of its ongoing turnaround restructuring efforts.

With $271 million in 2001 sales, Warren Electric is the 19th largest electrical distributor, according to Electrical Wholesaling magazine's Top 250 listing.