A consulting firm took the reins at embattled papermaker American Tissue Inc. on Monday when the Long Island company's top two officers stepped down, shortly after its chief creditor accused management of "fraud, dishonesty, incompetence and gross mismanagement."
Brent I. Kugman was named chief restructuring officer at the Hauppage, Suffolk County, manufacturer on Friday. Reached Monday at his office in Chicago, where he is the president of Brent Kugman and Associates, he said it is "very premature" to say whether the company will be shut down, sold or continue to operate.
The company, which filed for Chapter 11 bankruptcy protection last month, has plants in the Capital Region. Company officials did not return repeated calls for comment.
A New Hampshire official, though, said the road to the end has been paved.
Peter Roth, an assistant attorney general with the state, said Kugman and another firm, Walber, Truesdell, Radick & Associates, "have the mandate to begin a wind-down and liquidation of the company."
Walber Truesdell of New York City will have "primary responsibility for the preservation and disposition" of collateral, according to court documents.
That could clear the way to sell American Tissue's mills to a new owner, if anybody wants them.
"The tissue industry is pretty consolidated already," said Cynthia Werneth, an analyst with New York City-based financial analyst Standard & Poor's. Standard & Poor's is a division of The McGraw Hill Cos. Inc.
Wernet said most of the competitors left are large, have large machines and are interested in large runs. "That is not American Tissue's MO," Werneth said.
American Tissue typically has bought small, struggling papermakers and added them to its fold.
Werneth covered the company until August, when S&P downgraded its rating on American Tissue and stopped watching it.
An American Tissue plant has been closed in Greenwich since July, affecting 60 workers, and another one in Halfmoon has been closed since August, affecting 80. When those plants were shut, company officials had hoped to reopen them in late summer and early fall. But those time tables have been scrapped.
A third plant in Waterford is running, but not at full capacity.
In all, the company employs 4,200 people and has operations in 19 states.
The latest drama started on Thursday, when LaSalle Bank N.A. of Chicago submitted a motion in U.S. Bankruptcy Court in Wilmington, Del., to install Kugman as trustee.
LaSalle, which represents a consortium of six lenders owed $140 million by American Tissue, said the company's management misrepresented its assets and took loans it wasn't entitled to. American Tissue responded in court that it did not deny "financial irregularities" and had taken its own steps to investigate, including hiring an independent accounting firm. Roth, the New Hampshire assistant attorney general, said both chairman Nourollah Elghanayan and president and chief executive Mehdi Gabayzadeh, stepped down Friday.
Shortly before filing for bankruptcy protection on Sept. 10, the company's chief financial officer stepped down. At the time, officials said the company's 1999 and 2000 financial statements could be flawed. Times Union