KENTWOOD – A Grand Rapids-area manufacturing group that recently made significant investments in the casino slots industry has filed for bankruptcy after racking up more than $10 million in debt.
The recent filing is a reminder that many local manufacturers are still feeling the effects of the COVID-19 pandemic, including swings from periods of low to high demand and the end of federal assistance programs.
Laurie Harbour, President and CEO of Southfield Harbor Results Inc.said around a quarter of the hundreds of manufacturers her consultancy regularly surveys are still ailing.
“We see 25 to 30 percent that if they don’t dramatically change their business, they will meet fate,” Harbor said. “This destiny could be bought or it could go bankrupt – there will be some kind of destiny, it doesn’t necessarily have to be bad. You only have financial problems. The federal (aid) funding is gone and the fight over supply chain issues is now affecting people.”
To the TG Manufacturing LLC, that fate was Chapter 11 bankruptcy when it and several subsidiaries filed in late February in US Bankruptcy Court in the Western District of Michigan. Headquartered at 4720 44th St. SE in Kentwood, the company includes West Michigan-based subsidiaries AIM Tool & Die, AIM Industries, Craft Steel and Dorr Industries. TG Manufacturing also owns Tupelo Tool & Die in Tupelo, Miss.
Affiliates TGM Coatings LLC and TG Turnkey LLC filed for Chapter 11 bankruptcy in February, while TG Integration LLC — hoping to obtain solvency — filed March 27.
Owned by Richard Achtenberg with a total of 36 employees, the four companies are represented by the Grand Rapids-based bankruptcy and commercial litigation law firm Keller & Almassian PLC. A bankruptcy judge approved a motion for joint management of the cases.
According to an affidavit and President Kevin Kyle’s affidavit, TG Manufacturing is seeking to sell all of its businesses as a going concern and has held discussions with several interested parties.
TG Manufacturing has closed its doors while TGM Coatings, TG Turnkey and TG Integration remain operational, according to court documents.
Attempts to reach TG Manufacturing were unsuccessful and Todd Almassian, a partner at Keller & Almassian, declined to comment.
Gambling upon gambling
TG Manufacturing specializes in manufacturing material handling and automotive components. Court documents showed the company had annual sales of up to $20 million at its peak.
According to Kyle’s affidavit filed with the court, the company lost a contract with a “major customer” in 2020, resulting in a sharp drop in sales. When the COVID-19 pandemic swept across the United States in March 2020, the automotive industry was hit particularly hard as vehicle production and the underlying supply chain encountered widespread disruptions.
TG Manufacturing then branched out into a growing segment of its business with the production of casino gaming and amusement machines, according to the affidavit.
To position itself in the market, TG Manufacturing acquired Grand Rapids’ slot machine integration business in June 2020 Turnkey Manufacturing LLCwhich operated a 20,000 square foot facility in Grand Rapids and served gaming companies throughout North America, as MiBiz previously reported. This department was then organized under the banner of TG Integration.
”Slots manufacturing is an exciting sector with tremendous growth potential globally, and we are excited to be able to offer some of the most vertically integrated products in the industry,” said Achtenberg when announcing the transaction last summer.
The Company began its vertical integration strategy in the casino gaming sector the year before when it acquired Grand Rapids-based A2Z Powder Coating, a supplier to the automotive, materials handling and gaming industries. The three related companies – TGM Coatings, TG Turnkey and TG Integration – worked together to vertically integrate the process of manufacturing gaming machines.
Similar to the momentum in the auto industry, the COVID-19 pandemic also rocked the casino industry as brick-and-mortar casinos were temporarily closed due to public health measures.
Before the downturn, TG Manufacturing, TGM Coatings and TG Turnkey were trying to shore up their finances, using Bank of America on a $5 million line of credit and a $2 million term loan in 2019, according to court documents emerges. This financing was secured by the assets of all three entities and was also personally guaranteed by Achtenberg.
The companies defaulted on the loan, and in January of this year, Bank of America filed a lawsuit in state court seeking a court-appointed receiver. According to court documents, the three companies owed Bank of America approximately $6.2 million at the time of the filing.
To compound its financial woes, TG Manufacturing has also been named in several civil lawsuits in the Kent County District Court for unpaid bills, resulting in sizeable judgments against the company. Over the past year, the company has had to deal with nearly a dozen civil lawsuits in district courts.
TG Manufacturing has experienced multiple judgments in favor of the company’s suppliers, including $1.5 million for Benteler Automotive Corp.$561,029 for a Chicago-based steelmaker Lafayette steel and aluminumand $96,563 for a Birmingham, Alabama-based industrial supply company GBA Supply Inc. All are classified as unsecured receivables in the TG Manufacturing filing.
While TG Integration initially attempted to avoid a Chapter 11 filing, “based on developments that have occurred since the filing of the first cases, it has become apparent that Integration would also need to file a Chapter 11 case,” which according to statements on March 27th was held for Kyle’s affidavit.
Meanwhile, three of the affiliates received forgivable paycheck protection program loans totaling nearly $1.9 million between April 2020 and March 2021, according to a program database. TG Manufacturing received $899,450 in April 2020 and another $756,685 in January 2021; TGM Coatings received $145,165 in February 2021; and TG Integration raised $90,962 in March 2021.
Harbor and her organization work with manufacturers across the country. She stressed the importance of business owners being proactive and making transformative changes in their businesses before disputes arise with their bank.
“We like to do[turnarounds]proactively and get it before the bank is breathing down your neck and pulling your line of credit,” Harbor said. “But if they don’t do that, then the bank forces someone to do it and then it becomes a major reorganization or liquidation or whatever.”
According to Harbour, manufacturers have seen demand swing in both directions in recent years, with challenges emerging in both highs and lows. During the peak of the pandemic, demand fell and became very volatile during plant shutdowns across the country. As the economy recovered, Harbor said demand rose about 30 percent in most sectors.
“There are two things that kill businesses: no business and too much business and no good management,” Harbor said. “Many of them weathered the tough times on federal funding and became too much in demand and could not be executed.”
For more than a year, bankruptcy lawyers have been forecasting an increase in bankruptcy filings, which has still not happened. A West Michigan bankruptcy attorney said MiBiz that pundits slightly misjudged how the pandemic and accompanying federal relief would affect the industry, but that the same fate is yet to come.
“When the pandemic hit, all the big boys filed and then there was a lull and the government pumped out money and there was a lot of shelter,” said the lawyer, who requested anonymity.
“The government’s money has run out. The tough businessmen who were organized and in good shape and didn’t depend on government funds, they will survive. But I expect over the next 36 months as the economy recalibrates and you see inflation, you will see more bankruptcies.”
However, some manufacturers remain well positioned, Harbor said. Businesses that have come into the pandemic strong and made the necessary adjustments are finding an unprecedented time of new opportunities.
“I have companies that land transfer work left and right because the big boys know so-and-so is going to drop, so they’re calling someone else to get the deal,” Harbor said.