Organ maker files for reorganization

September 01, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

M. P. Moller Inc., once the world's largest maker of pipe organs, filed for Chapter 11 bankruptcy protection yesterday in a bid to resurrect the 117-year-old Hagerstown company.

The company closed on April 10 after running out of cash to pay its 115 workers and suppliers. It hopes to reopen in a few months if the bankruptcy court and creditors approve a refinancing plan.

In papers filed with the U.S. Bankruptcy Court in Rockville, Moller said it plans to get $1 million in loans from the state, Hagerstown and Washington County. Another $1 million in equity investments would be provided by a union pension fund and private investors, the company said..

Moller is owned by M.P.M. Holdings Inc., which was formed in 1989 to buy the organ maker. Under the reorganization plan, the assets would be sold to a new entity, Maryland Organ Acquisition Corp. Moller has $2 million in assets and more than $3 million in liabilities, the filing said.

Its biggest creditor is the Hagerstown Trust Co., which lent the company $1.8 million. But $1 million of that debt is guaranteed by the state through its Maryland Industrial Development Financing Authority.

Under the plan, Moller would repay the state-guaranteed portion of the debt over 15 years. The other secured loans to Hagerstown Trust would be repaid over 10 years.

Unsecured creditors, who hold about $1 million in debt, would receive only 5 percent of the new company's profits in 1994 -- if there are profits.

Paul J. Coughlin Jr., Moller chairman and chief executive, said the secured creditors would get more from the plan than if the company was liquidated. "There really is not much there of value," he said. "It has more value as an ongoing concern."

When the company closed, it had annual revenues of about $8.2 million, claimed about 24 percent of the domestic pipe organ market and had a $7 million backlog of orders.

The plan calls for a $500,000 investment from the pension fund of the International Union of Electrical Workers, which represents Moller workers.

Craig H. Livingston, a principal with Working Equity, a New York City firm that is coordinating the deal, said the union's pension fund has not been approached about investing in the new company, but he is confident the fund will sign on.

Besides the union investment, the plan calls for a private sale of $500,000 worth of stock to about 20 unidentified investors.

The state has tentatively agreed to lend the company $500,000, the bankruptcy filing said. Other tentative lenders are Hagerstown for $200,000 and Washington County for $300,000. "This is an employee-community buyout," Mr. Livingston said.

If the deal goes through, the company would be in much stronger financial shape with lower debt and more cash. "It will be one of the best capitalized organ makers in the country," Mr. Livingston said. He said he hopes to have the deal completed within two months.

Besides contributing their pension money, the union workers will work more hours for the same pay. During the first year, workers will work 50 hours a week for three weeks of each month at their old weekly wage. In the second year, they will work 45 hours for three weeks each month. After that, the plant will return to a 40-hour week.

The average weekly pay at the company was about $420, Mr. Coughlin said.

Moller was founded in 1875 by Mathias Peter Moller, a Danish immigrant. It has built nearly 12,000 organs, more than any other company, the filing said. Its custom-made products ranged from $50,000 small standard organs to $1 million instruments.

It has built pipe organs for West Point, the U.S. Naval Academy in Annapolis, the U.S. Air Force Academy, In Colorado Springs, Colo., the National Shrine of Immaculate Conception in Washington and Lincoln Center in New York.

In the 1960s, Moller had 30 percent of the market. But during the next two decades, its position slipped because of declines in some church memberships, competition from electronic organs and product quality and management problems.

Since 1980, it has had only one profitable year, according to the bankruptcy filing. In 1988 it was hit by a five-month strike.

Two months after the strike, The Moller family sold the company to a group of investors led by Mr. Coughlin and Roland F. Funk.

Despite boosting revenues from $4.4 million in 1988 to $8.2 million in 1989, the new management was saddled with large debts from the acquisition and a modernization effort.

The final blow come in late 1991 when sales plummeted because of the recession, Mr. Coughlin said.

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