The onset of a global health pandemic seemed to bode well for companies in the right sector, like disinfectant wipes maker Gilbert GPMI Company, but things didn’t go as planned.
After a major expansion deal with an Israeli industrial partner turned sour, the company was forced to halve its workforce.
This week, the company filed for Chapter 11 bankruptcy protection. This means the company is entering into a side deal with its secured creditors in exchange for restructuring its largest debts. A secured creditor, like a bank, has security in the event of default.
Often, during a bankruptcy proceeding, unsecured creditors – sub-contractors of sub-contractors and small local businesses – could end up with many empty bags.
According to bankruptcy filings in federal court, GPMI has more than 100 creditors who want to be paid. The company had between $10 and $50 million in assets or the total value of the company and between $10 and $50 million in debts to creditors or payables.
GPMI has $13.3 million in unsecured claims from 116 creditors, records show.
He generated $14 million in revenue during the bad deal of 2021 and all, according to bankruptcy records.
Yarron Bendor, an Israeli entrepreneur, founded GPMI in 1989, and is headquartered in Arizona ever since. The company manufactures wet wipes of various types for companies including US companies The Clorox Company and Procter & Gamble Company, but also the Dial brand created by German giant Henkel AG, according to court documents.
GPMI had over 100 employees. Most received pink slips.
A recent scathing Google review of the company by a former employee described a tumultuous year, in which dozens of newly hired employees were laid off and the hours were so unpredictable “that at one point people started to quit.”
The company – which did not return immediately Phoenix New Times’ inquiries for this article – said in court documents that his financial problems began with the pandemic.
Although in the spring of 2020 demand for wet wipes and other disinfectant products increased, eliminating them from drugstore and grocery store shelves, shortages of manufacturing materials made it increasingly difficult for GPMI to keep pace. .
We all remember browsing the empty shelves for them.
Additionally, cheaper, lower-quality products have flooded the market, which GPMI says has contributed to lower demand in 2021.
But it was a deal with an Israeli hygiene giant, Albaad Massuot Yitzhak Limited, that ultimately landed GPMI in serious debt.
Albaad is listed on the stock exchange and claims to be one of the world’s largest manufacturers of wet wipes and other hygiene products. It does business in the United States and Europe in addition to Israel. In the spring of last year, he offered GPMI an attractive deal: he wanted to order tens of millions of products from the company, to bolster its offerings in the United States when demand peaked. Albaad promised the local company $80 million in orders in the first year and $100 million in the second year, according to GPMI.
The expansion of the company, at the time, has been touted as a win for Gilbert’s economy. GPMI spent $7.5 million to speed up operations, somewhat offset by Albaad’s $3.75 million upfront payment.
But things quickly turned sour.
GPMI built new facilities, hired dozens of new employees, and began shipping product.
Albaad’s client needed FDA approval for their product but ran into problems securing it.
Albaad never paid for or even collected the products, according to the bankruptcy filings. GPMI ended the year with revenue $37 million lower than forecast.
GPMI was forced to pay $17,000 to stock products for which it had no buyer and was $800,000 short of budgeted revenue. And the Israeli company was not ready to buy $25.5 million more of the product by the end of December 2021.
“Other promises of payment were made by Albaad but nothing materialized,” Bendor said in court filings.
It turns out that Albaad decided to tell its shareholders that it would cancel $10 million from its failed US expansion venture “due to issues with its customers and distributor and research litigation options with its partners,” GPMI said in bankruptcy court filings.
Still, GPMI painted a rosy future for its sales, saying it still forecast more than $15 million in revenue for the coming year, given the new customers it had developed.
The company got a $2.5 million loan to pay its remaining employees and other expenses until it could restructure and even consider selling itself out of its mountain of debt.
He also says he plans to seek damages from Albaad in civil court, whose “failure to perform has threatened the very survival of GPMI.”