Tufnol in Receivership

Tufnol Ltd. (UK) is in receivership, the UK equivalent of U.S. bankruptcy, in the hands of creditors. Founded in 1929, Tufnol manufactures TUFNOL brand machined engineering plastics and fiber-reinforced composites, using PTFE-impregnated, phenolic, rubber, epoxy and polyester resins. Tufnol then uses those raw materials to manufacture bearings, gears, tubes, and other engineered components. The company's plastics machining center is one of the largest in Europe. Tufnol manufactures non-lubricated, self-lubricated and outside-lubricated bearings and bushings from a wide variety of Tufnol engineered materials, the choice made based on each individual application. Molded bearings can be produced in sizes up to 228mm OD, while thinwall rolled laminated bearings can be produced in sizes up to 660mm OD. In marine applications, water-lubricated Bear Brand Tufnol bearings are widely used for stern tube bearings and rudder bearings. In recent years, Tufnol has faced increasing pressure from overseas competitors, exacerbated by the high costs of doing business in the UK and the relative strength of the pound sterling. Tufnol's owners also came under criticism for failing to invest in modernizing the business or its manufacturing processes. But the end, said several employees, can be traced to the management buyout. In early 2000, Tufnol's production director Ken Aston and finance director Peter Jones engineered a highly leveraged buyout of the company from its private owner Trotman family and parent Tufnol Industries. The buyout included Tufnol and Countrose Bearings in Birmingham, and Tufnol South Africa. Several analysts indicated the buyout was overleveraged -- for example, management committed to factoring receivables for four years -- and destined to cause cash flow problems. After the buyout, the world manufacturing economy fell into recession; Tufnol's leveraged finances suffered disproportionately as sales and cash flow declined. In August, retired workers were shocked to learn the company had stopped funding the pension plan in January 2003. Instead, a letter from management described urgent refinancing negotiations underway and that, "The view we have taken during this protracted period of negotiation is that our limited cash resources should be used for the payment of employees¡¯ wages and salaries, key suppliers to keep the business running and other essential creditors." The UK does not yet have a government-backed fund to ensure underfunded pensions continue to support retirees. A government-backed UK Pension Protection Fund is scheduled to ramp up in the near future, however. The company's 12,500 square meter operation in Birmingham employs approximately 130 people; 2003 sales were just over $9.1 million. It continues to operate in receivership as a buyer is being sought. Many believe there is value in the business; for example, only Tufnol and Attwater Group are active in the UK's laminated industrial plastics market. Employees are represented by the Transport and General Workers Union. Administrative receivers are BDO Stoy Hayward; Kim Rayment is the administrative receiver. The company is being widely advertised for sale, and many believe it is an acquisition candidate due to its strong customer list and market niche