In the fall of 1989, Donald G. McClure was running out o everything from doorknobs to time.
His storm window and door-making business, Baltimore-based Acadia Manufacturing Co., had filed for bankruptcy five months earlier and was so cash-starved it couldn't buy all the supplies it needed. The company faced an unpaid tax bill of $350,000 -- more than a liquidation auction would raise. And business loans Mr. McClure had personally guaranteed were overdue, forcing him to file for personal bankruptcy.
Mr. McClure told Stephen Seymour, a business acquaintance, that a reorganized and recapitalized Acadia would be a success -- but he hadn't been able to find a backer.
That's when Mr. Seymour, a Ruxton investor who had built a multimillion-dollar turnaround fund by buying and selling radio stations in the 1980s, had a vision.
He saw a pony.
Mr. Seymour explains his vision this way: A father gives his two sons keys to two identical rooms. The boys eagerly unlock the rooms, only to find each one packed with manure. One son pokes around for a minute, then returns to his father asking him why he gave him a roomful of manure. The other son digs like mad, convinced there is a pony in the back, making all the manure.
Mr. Seymour says he thought Acadia was a mess, but there was a pony in there somewhere. Despite its problems, 43-year-old Acadia, which at its height had more than 100 employees producing 40,000 windows a year, still had loyal customers, a strong product and a good name, he believed.
So Mr. Seymour, best known for his management of Baltimore's WMAR and WJZ television stations in the early 1980s, formed a partnership with Mark Wright, a former International Playtex, Inc. executive.
The two bought Acadia's debts for pennies on the dollar. They poured $75,000 in cash into Acadia to keep the glass, vinyl and hardware coming. They moved the company into a new plant. And they started developing new products to catch up with competitors and began marketing Acadia's vinyl replacement windows like crazy.
The result: Although there are still plenty of hard feelings among some of Acadia's creditors and suppliers -- unsecured creditors were stuck with $1.4 million of Acadia's unpaid bills -- the company has emerged from bankruptcy.
The story of Acadia's dramatic fall is, in many ways, a typical story for these days of record business failures.
A combination of the debt binge of the 1980s and the recent recession contributed to a record 1,356 business bankruptcies in Maryland last year, nearly triple 1989's level.
And as the defaulters spread out their losses, more and more businesses are pulled under. According to Dun & Bradstreet, 384 Maryland businesses failed in the first four months of this year -- more than double the rate for the same period in 1990.
For a variety of reasons -- ranging from the recession to an owner's reluctance to admit mistakes -- only about one in 10 Maryland companies that file for bankruptcy will successfully reorganize, says Murray Siegel, senior bankruptcy analyst at the Justice Department's Baltimore office.
That's why Acadia's recovery story is unusual, bankruptcy experts say. Those familiar with Acadia say it will need several more months of strong sales to return to firm financial ground, but Acadia now has a fighting chance to return to profitability.
Bankruptcy experts say the way Acadia got into trouble -- and is now digging its way out -- reveals how dramatic a reorganization must be for it to succeed.
Acadia has been refashioned several times in its bumpy history.
After two of the founder's sons, Charles and Robert Barry, died in the 1970s, remaining family members decided to sell what was then a profitable aluminum storm window and door-making business.
Mr. McClure, who was working for Maryland National Bank and looking for an investment, joined a Florida investor to buy the company for $780,000 in 1979. Mr. McClure said he and his partner, Harold Gore, borrowed about 60 percent of the purchase price, and then quickly changed the company's product line to vinyl windows, which were taking over the storm window market from aluminum.
After a couple of years, Mr. McClure, who was running Acadia, decided to expand by buying a Philadelphia-based maker of aluminum windows and doors.
"It was the single most stupid thing I've done in my life," Mr. McClure says now of the $350,000 purchase of a company called Stephen Laurie.
Acadia executives didn't investigate the company very well. They discovered after the purchase that Stephen Laurie was hemorrhaging money, was millions of dollars in debt and was losing market share rapidly, Mr. McClure said.
Mr. McClure says he sued Stephen Laurie's former owner for misrepresentation but lost. He soon realized the best thing to do would be to liquidate Stephen Laurie.
By 1987, all Acadia had to remember from its attempt to grow was $4.6 million in debt, production problems and plenty of disaffected customers.