Encompass To Focus On Residential Services
Encompass Services Corp. intends to retrench into a residential service organization, according to the reorganization plan the company filed on March 5, 2003, with the U.S. Bankruptcy Court for the Southern District of Texas. In it Encompass detailed plans to focus on its Residential Services Group, which provides plumbing and HVAC services for mostly single-family and low-rise multifamily homes, and small commercial buildings. About 80 percent of the group's 2002 revenue came from new construction, the company stated in court documents.
"We have made significant progress with our restructuring efforts in a short period," said Michael F. Gries, chief restructuring officer of Encompass, in a statement. "We expect to emerge from Chapter 11 in the second quarter of 2003."
The new company will be headquartered in Dayton, Ohio, with operations in nine states. Eric Salzer will be its chief executive officer, Tim Johnston will serve as the chief financial officer, and both Richard Siefring and Tom Vossman are the company's senior vice presidents of operations. All are current Encompass management staff.
The reorganization plan is contingent on the approval of the bankruptcy court, which will conduct hearings on Encompass' disclosure statement and plan, tentatively scheduled for April 9, 2003, and May 21, 2003, respectively. A spokesperson for the company told PM they foresee no problems with approval of the plan.
Salzer withheld comment until the sale is finalized.
The company stated that it has sold almost all of its assets outside of the Residential Services Group; 33 companies total for proceeds of $156.5 million. This includes the Cleaning Systems Group, and substantially all of the mechanical and electrical contracting firms that comprise the Commercial/Industrial Services Group, as well as a few noncore properties in the residential group. According to court documents, the Commercial/Industrial Services Group accounted for nearly 80 percent of Encompass revenues prior to its bankruptcy filing date.
New York-based private equity firm Wellspring Capital Management is supplying the investment funds to support the reorganization. If the plan is approved, Encompass will become a private company as Wellspring and Salzer's management team will own all outstanding shares of the new entity.
This is the first foray into the construction industry for Wellspring, which also has acquired companies such as the model-train manufacturer Lionel, food distributor Vistar, musical instrument retailer Brook Mays, and tour operator Far & Wide Travel.