Miami firm tapped to run bankrupt Shapes/Arch

The Miami buyout firm H.I.G. Capital Partners L.L.C. has taken over bankruptcy financing for Shapes/Arch Holdings L.L.C., one of South Jersey's largest employers, displacing rival Versa Capital Management Inc., of Philadelphia.

Shapes, based in Pennsauken's Delair section, employs 1,000 at plants in Pennsauken and Bensalem. Shapes makes aluminum and plastic parts for truck-makers and home builders.

Sales dropped last year as the U.S. economy slowed, Shapes said in its March filing for reorganization under Chapter 11 of the U.S. bankruptcy code.

H.I.G., which says it has $4.5 billion invested in U.S. and European firms, agreed to lend as much as $30 million to Shapes, and to hold an auction that would let other bidders make sweeter offers, under an order signed yesterday by U.S. Bankruptcy Judge Gloria M. Burns in Camden.

Attorneys for H.I.G. did not return phone calls.

Versa had offered to lend Shapes up to $25 million in exchange for control of the firm, under a March proposal supported by Shapes chief executive officer Steve Grabell and other company officials and owners.

Creditors filed court objections to the Versa plan and backed H.I.G.'s offer. That's because Versa proposed spending just $500,000 to pay an estimated $30 million-plus in Shapes debts to suppliers, contractors and other creditors, while H.I.G. agreed to set aside $5 million, said lawyer Alan Halperin of Halperin Battaglia Raicht L.L.P., New York, which is representing Shapes creditors.

H.I.G.'s proposal still would leave creditors with large losses, but makes it possible for other bidders to offer more money - an improvement over Versa's closed proposal, Halperin said.

"This is a fantastic thing," he said of the H.I.G. deal. "We thought it was inappropriate not, at least, to subject the assets to market forces."

Versa said in a statement e-mailed by spokeswoman Kristy Lash that it had been "protecting this significant area employer from imminent abrupt closure" when it gave Shapes "rescue financing" in March. It said creditors "preferred a riskier path" by going with H.I.G.

"Pursuit of pure financial advantage can sometimes expose other stakeholders such as employees, customers, suppliers and communities to increased uncertainty," Versa said. Versa may make another attempt to buy Shapes, the statement added.

Grabell and Versa managing partner Gregory Segall declined to comment. Versa is an affiliate of Ira Lubert's Independence Capital Partners, a consortium of real estate and private-equity funds that ranks among the Philadelphia area's largest investors. Clients include the Pennsylvania state workers' and teachers' pension funds, SERS and PSERS.

Sun Capital Partners Inc., of Boca Raton, Fla., also has said it wants to buy Shapes. H.I.G. will collect a $1 million "breakup fee" if someone else ends up buying the company.