Heatway files for bankruptcy protection
Heatway filed for bankruptcy after the adverse ruling in its ongoing dispute with Goodyear Tire & Rubber Co. over Entran II rubber tubing.
Watts' purchase offer must be approved by creditors and by Federal Bankruptcy Judge Arthur B. Federman.
"Watts intends to create a new subsidiary focused on the radiant heating and snowmelting market," said Mike Fifer, president of Watts. "The new company will sell an expanded line of products and services, including Heatway's Onix and EPEX product lines."
Heatway President Mike Chiles and Vice President Dan Chiles will not receive money from the purchase by Watts. Any money that comes into Heatway will be divided up among creditors, including homeowners with warranty claims for Entran II.
Dan Chiles said anyone with a warranty claim should go to Heatway's Web site, www.gme2.com, and register as a warranty claimant. Warranty claimants will be treated as another creditor for the bankruptcy proceeding.
"It's important that people who have claims go to the Web site and register," Chiles said. "All claims are subject to the bankruptcy court and its rules, but it's clear that if you don't make a claim, you lose your opportunity."
A meeting of creditors was held in Springfield April 5 and Judge Federman will hold a status hearing April 17.
Once the bankruptcy judge decides how all available assets will be distributed to creditors, including warranty claimants, Heatway will no longer be liable for any other claims. Watts will not assume any liability for old warranty claims.
Fifer said Watts wanted to buy Heatway for a number of years. It drafted its offer before Heatway went to trial against Goodyear.
"None of the funds would go to existing shareholders," Fifer said. "It would go into the corporation to buy all the assets, but the court will take the funds and make them available to the various classes of creditors. It was a fair offer when we thought Heatway was going to win and we have not reduced our offer one penny, so it"s something we hope the court and creditors will look favorably on."
Chiles said he's been advised that, in terms of normal bankruptcies, Heatway's will be brief and to the point. The only hang-up, he said, will be if Goodyear objects to the reorganization plan. Heatway still owes Goodyear $2.5 million.
"There's only so much money to be divided up and there are warranty claimants who will raise the issue that the money should go to the people who have suffered from the failure of this hose," Chiles said. "Then it's up to Judge Federman to decide where the money should go."
Fifer has asked both Chiles brothers, Heatway Vice President of Sales Russ Rose and all of Heatway's top managers to stay on to manage the new company. Chiles anticipates that the company will operate as the Heatway Division of Watts Industries.
Watts has been a long-time vendor to Heatway, Fifer said. He described the purchase as a vehicle to showcase its products and an opportunity to enter a rapidly growing part of the market. The firm hopes to start selling entire systems as opposed to components.