NECCO set for bankruptcy auction
Massachusetts bankruptcy judge sets auction for May 23 despite purchase negotiations with Boston investment firm.
May 8, 2018
The New England Confectionery Co. (NECCO) is headed to auction after a failed attempt by a Boston investment firm to buy the embattled confectionery company.
In a May 4 filing, a federal bankruptcy judge greenlighted the bidding process, noting cash bids of at least $13.96 million must be made before May 18. The auction is set for May 23.
The minimum bid is $665,000 higher than a $13.3-million purchase price NECCO and investment firm Gordon Brothers — which has also been involved in the dissolution of Toys ‘R’ Us — had negotiated before the judge opened bidding.
Provided Gordon Brothers wins the auction, NECCO could continue to produce Necco wafers, Mary Jane candies, Clark bars and other items through November.
Federal bankruptcy court documents show two packaging companies and a transport company slapped NECCO with petition for involuntary Chapter 7 bankruptcy on April 3, alleging the Revere, Mass.-based company had not paid debts totaling $1.6 million.
Two weeks later, NECCO filed a request to convert to Chapter 11 bankruptcy, noting it had been working on a potential sale. An affidavit from Threadstone Advisors said NECCO, with help from the advisory firm, sought potential buyers as early as September 2017.
After contacting 45 potential buyers, nine submitted indications of interest. NECCO has selected the bid from Gordon Brothers, and a transaction was reaching the final stages in March when its secured lender, ACAS, LLC, called on the wafer manufacturer to repay its debts immediately. As of April 3, NECCO owed ACAS $107 million.
An April 17 filing shows NECCO intended to sell assets to a Delaware-based limited liability company formed in March by CT Corporation, a registered agent working on behalf of Gordon Brothers.
Reports of NECCO’s trouble first surfaced in March, when NECCO CEO Michael McGee reportedly told Massachusetts and Revere officials that the company faced laying off 395 employees if it didn’t find a buyer.
When the news broke, frenzied Necco fans began snapping up wafers and other NECCO sweets in case the manufacturer ceased operations. Candystore.com spokesperson Clair Robins told Candy Industry that wafer sales jumped 150 percent in April, while sales of all NECCO items grew by 82 percent.
Former CEO Al Gulachenski, who served at the company’s helm from 2011 to 2015, also launched a GoFundMe page with the goal of raising $20 million. As of Tuesday afternoon, $4,510 had been raised.