More than 100 lose their jobs as Chesapeake Beverage closes Havre de Grace firm was in bankruptcy

November 01, 1992|By Phyllis Brill and Frank Lynch | Phyllis Brill and Frank Lynch,Staff Writers

Chesapeake Beverage Corp., a soft-drink bottler based in Havre de Grace, shut down abruptly Friday, leaving more than 100 employees out of work -- and without their last two-week paycheck.

Officials of the company, which had filed last year for protection from its creditors under federal bankruptcy law, gathered employees in the cafeteria shortly before noon, told them of the plant's closing and sent them home.

Joel Sher, a court-appointed trustee for Maryland National Bank, said the decision to close the plant came Thursday night.

"I was called in to take a look at [the]situation on Oct. 23, and what I found can only be described as incredible," said Mr. Sher.

What he said he found was an "absence of management" -- no cash on hand, taxes amounting to more than $300,000 that had not been paid over several months, unpaid union benefits and checks bouncing.

"I tried to find alternative sources [to pay employees], but was unsuccessful," said Mr. Sher.

"So rather than allow this situation to go deeper into debt, a decision was made to shut down."

Mr. Sher said two potential buyers have been considering the firm, and it could open under new ownership.

"I can't forecast a target, but in the meantime we are going to assist all the employees in getting unemployment [benefits]," he said.

As a precaution, Chesapeake officials called Havre de Grace police to the plant, in the Chesapeake Industrial Park on Old Bay Lane, before making the announcement.

Police reported that there were no incidents.

Bruce J. Hegstad, who was Chesapeake's president, said he was no longer involved once the trustee took over Oct. 23.

"We spent a lot of time and effort and money to resurrect this business," Mr. Hegstad said.

"It got very close, but we didn't quite get there."

In the past three years, Mr. Hegstad said, the owners sank nearly $2.5 million into the company.

In June 1991, Chesapeake sought protection from creditors under the U.S. Bankruptcy Code after a plan to merge the company with a bottling firm in Oklahoma was put on hold.

At the time, the company listed $4.25 million in assets and $6.3 million in liabilities.

The company, which reported revenues of $4 million in 1990, said it owed Maryland National Bank more than $3 million and had debts to numerous suppliers.

In a June 1991 interview, Mr. Hegstad said that, despite the reorganization filing, Chesapeake Beverage had no plans for layoffs at the Havre de Grace production facility.

Mr. Hegstad, then a major investor in the bottler, insisted at the time that the company's business had not been hurt by the Chapter 11 filing and that he expected the company to survive.

Mr. Hegstad is a former president and chief executive officer of the Kirschner Medical Corp.

He and four others purchased the 68,000-square-foot bottling plant and the company it housed, Zeltzer Seltzer fruit sodas, from the Anheuser-Busch Beverage Group in August 1988 for an undisclosed amount.

Financial records showed the bottler was profitable when Mr. Hegstad and his partners bought it, he said.

H. James Lynch, regional director of the United Food and Commercial Workers Union Local 27, which represents Chesapeake employees, said that the plant's closing did not surprise him.

"It's a sad situation, but it's just been getting progressively worse up there," he said.

He said the union would talk with its attorneys about possible arbitration, and "get in line as creditors."

News of Chesapeake's closing troubled Harford County Executive Eileen M. Rehrmann, a spokesman said.

"The county executive is very concerned about this because 110 jobs are at stake," said George Harrison, county government spokesman.

Mrs. Rehrmann hopes another operator takes over the plant so the jobs can be preserved, Mr. Harrison said.

"But things are so complicated, we don't know how much of a real possibility that is," he added.

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