18.08.2006

Thomas Equipment files for protection

Thomas Equipment, the Canadian producer of skid steer loaders, mini excavators and telescopic handlers has announced that its wholly-owned subsidiary Thomas Equipment 2004, Inc intends to initiate court-supervised restructurings and has laid off 141 employees.

The company says that the restructuring is designed to provide Thomas Equipment with appropriate financial resources to address short-term needs and successfully execute its longer-term strategic opportunities.

The filing gives Thomas an initial 30 days protection against its creditors, which may be extended upon subsequent applications to the Court or by the filing of a proposal to creditors.

Thomas Equipment, Inc, the parent company and other subsidiaries, including its European distribution centre in Belgium are not part of the proceedings. Thomas Equipment was listed on the American stock exchange on March 13 of this year.
Please register to see all images

Clifford Rhee (R) shortly after he rang the opening bell of the American stock exchange on March 13th

Thomas has engaged Carl Marks Advisory Group, to provide financial advisory services during the restructuring and to assist the group to “generate interest among prospective investors, acquirers or merger candidates and advise the company through all future negotiations and proposed transactions”.

A little history

Thomas Equipment Inc, a company registered in Delaware USA, began life as Maxim Mortgage Corporation, a mortgage broker.

In May 2004 its business ground to a halt when its relationship with Nova Star ended. In November 2004 it essentially changed its name to Thomas Equipment Inc, forming a subsidiary, Thomas Equipment 2004, Inc specifically to buy the assets of Thomas Equipment Ltd from the McCain Foods group, the world’s largest producer of French fries, which had owned Thomas since 1964.

It paid $32 million for Thomas most of which was leveraged against the acquisitions assets.

In December 2004 Thomas Equipment Inc acquired Pneutech Inc a manufacturer and supplier of hydraulic and pneumatic components controlled by Clifford Rhee.

In January 2005 the company opened a plant in Busan Korea, then in November 2005 it acquired Tovel, a manufacturer of telescopic handlers. Thomas enters telehandlers

In March of this year Thomas Equipment Inc was allowed to ring the opening bell at the American stock exchange as its stock was traded there for the first time.

Since then everything seems to have gone wrong. In June it fired its CEO, Clifford Rhee “with cause” See Thomas fires CEO Rhee had run the company since the Maxim days.

A day or two later the company fired Realization Services, Inc a consultancy hired in April to help the business.

In July it closed the Korean plant [link:http://www.vertikal.net/en/stories.php?id=2730]] Thomas to close Korean plant[[link]] after failing to get any serious production running.

Shortly after the plant closure announcement the company disclosed that it had extended its OEM agreement with Hyundai and expected to ship it around 1,000 units in 2007.

Vertikal Comment

Since the "financiers" took over Thomas at the end of 2004 it appears to have been 'smoke and mirrors' all the way. Almost everything the company has done, looks as though it was targeted at impressing investors and analysts rather than building a solid equipment business.

The company had its first law suit against it almost as soon as it started. Neil D"Souza who had been the CEO of Thomas before the acquisition and had apparently been hired to acquire the business, was, according to the company's SEC filings, fired "for cause" almost immediately after the acquisition. D'Souza filed a suit against the company for almost $500,000.

(Note: Follwoing the initial posting of this story, Neil D'Souza contacted us and said that he had never been fired "for cause". He was simply told that there was no place for him in the new business. later he was apparently asked to come on board as a consultant, and yet the SEC filings of the time cleary state the opposite, seemingly in order to persuade investors that the suit would not be successful)

No reason for the firing of Clifford Rhee has been given, and it is most likely subject to legal action. However Rhee owned a controlling interest in Pneutech, which was acquired by Thomas in 2005. Pneutech had owned a plant in Korea... In Busan.

What manipulations occured within Thomas is anyones guess, the sad thing is that those most affected are the employees, the distributors and the customers, all of whom have acted in good faith.

Hopefully a company such as Hyundai will consider taking over the business in order to secure the supply of its Skid steer loaders.