Announcement of Bankruptcy Filing by Nation's Largest Auto Glass Retailer May Be Imminent

Safelite Glass Corporation of Columbus, Ohio, is considering a number of options to deal with its debt problems, including reorganization under Chapter 11 of the U.S. Federal Bankruptcy Code. Sources within the company say that such action may occur within the week, possibly as early as tomorrow, June 9.

AGRR Magazine has learned that letters to creditors and customers have been prepared and an announcement is expected soon.

The nation's largest retailer of auto glass repair and replacement services has been plagued by high levels of debt service, low pricing levels and sales that did not meet its expectations. Earlier this year, one of its largest customers, Allstate Insurance, declined to renew a long-term contract with the company leaving the company scrambling to make up volume (See USGlass Magazine, November 1999, page 16). The company, with high debt levels due in large part to its acquisition of the merged Windshields America-Globe Glass & Mirror, reportedly missed its most recent scheduled payment on the debt last month.

The company had returned repeatedly to investors, including the Thomas H. Lee company (THL), for more operating capital in the past. THL reportedly let the company know late last month that it would put no more cash into the business. Safelite also reportedly recently cancelled a large raw material order with an offshore supplier.

When reached this morning, Dee Uttermohlen, Safelite's marketing manager said, "You know and we know that we have debt problems. That is no secret. We are considering six options, and that is one of them. Any such action requires a vote by the Board of Directors and no action has been taken by the Board ... I know of no meeting scheduled at our offices for the Board of Directors."

Uttermohlen said the company's financial people "have been talking to Thomas Lee, talking to Belron, talking to a lot of people about the situation," but that bankruptcy is by no means a certainty.

Under a bankruptcy re-organization, the company proposes a re-organization plan that must be approved by the courts and creditors. The creditors have an opportunity to vote on the plan, but the ultimate approval of the plan rests with the court. Secured creditors are likely to be made whole–at least up to the point of the value of their secured interest. Unsecured creditors generally receive some percentage of the amount owed to them.

Such an announcement would likely send shock waves through the entire auto glass replacement industry. Many glass shops due work as subcontractors to Safelite and are owed monies by the company. AGRR magazine has learned that two major glass chains sent announcements to their shop locations last night, telling them to do no more work for the chain in light of the impending announcement. "That doesn't surprise me," said Uttermohlen when told of the moves, "that's just the kind of rash behavior that we've seen in the past."

AGGR Magazine, a Key Communications company, continues to be on the leading edge of glass industry breaking news. If you are engaged in the Auto Glass Business, you can qualify for a free subscription.