NEW YORK (Reuters) – DHP Holdings II Corp, parent of fireplace and heater maker Desa Heating, filed for Chapter 11 bankruptcy protection on Monday and said it would pursue an orderly wind down of its businesses, citing the sagging economy and credit crunch.
The Bowling Green, Kentucky-based maker of indoor and outdoor heaters and garden electrical products said its senior lenders had halted all new loans and frozen the company’s bank accounts in early December. That liquidity crunch, coupled with a dramatic decline in demand for its products, caused the company to file for protection from creditors, it said in court filings.
“Debtors did not have the cash necessary to continue the operation of their business in the ordinary course, and were unable to obtain additional financing outside of bankruptcy,” The company said in its filing in the U.S bankruptcy court for the district of Delaware.
As of Nov. 29, the company, along with its nondebtor subsidiaries and affiliates, had assets of $132.5 million and liabilities of $133.2 million.
In 2002, private equity firm HIG Capital had bought former Desa entities, Desa Holdings Corp and Desa International LLC, for about $198 million after the companies filed for Chapter 11 bankruptcy.
The company owes some $40.8 million in senior debt under the prepetition senior credit facility, for which GE Business Financial Services is the agent, according to court filings.
DHP also owes about $15 million in subordinated debt under the prepetition subordinated credit agreement. HIG Capital Partners is the agent for the subordinated credit agreement.
The company said its international arm, HIG-DHP Barbados, had not joined the bankruptcy petition. HIG-DHP Barbados holds 100 percent of the equity of all foreign nondebtor subsidiaries, which manufacture, distribute and sell commercial and consumer goods in Europe, Mexico, and Canada.
After layoffs in December, the company employed 292 people, who will help wind down remaining business operations.
The company’s brand names include ReddyHeater, Comfort Glow and Master Portable Heaters.
The case is In re: DHP Holdings II Corporation. US Bankruptcy Court for the District of Delaware, No. 08-13422.
(Reporting by Chelsea Emery; Editing by Steve Orlofsky and Matthew Lewis)