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Westpack Packaging Solutions Files for Chapter 11 Bankruptcy

A family-owned packaging company, Westpack Holdings Inc., has recently filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Western District of Michigan. The company, based in Muskegon, cited “significant financial strain” resulting from reduced demand and higher debt payments following a major equipment upgrade. To navigate the bankruptcy process more efficiently, Westpack filed under Subchapter V of the U.S. Bankruptcy Code, which is designed to assist small businesses in reducing time and costs.

With small businesses like Westpack, financial struggles can arise when interest rates rise and industry conditions impact order volumes. To guide Westpack through the bankruptcy proceedings, the company has enlisted the representation of Todd Almassian, a partner at Grand Rapids-based law firm Keller & Almassian PLC.

Established in 1996 as Innovative Package Engineering, Westpack specializes in producing and supplying custom packaging solutions using materials such as plastic, foam, corrugated, and honeycomb. Their diverse customer base includes industries such as automotive, furniture, consumer products, and casting and machining.

Westpack is owned by Richard Wilson, who acquired the business in November 2016 and currently serves as its president. The company operates from a 44,000 square-foot commercial warehouse space in Muskegon, leased from Leestma Management LLC.

According to court filings, Westpack has reported over $869,000 in total assets and approximately $2.16 million in total liabilities. The company is currently exploring a potential sale, with an interested buyer already signed as a potential stalking horse bidder. Other interested parties have also emerged, creating the possibility of an auction for the business.

Despite the financial challenges, the support from vendors and customers has allowed Westpack to continue operating. Todd Almassian expresses optimism about completing the bankruptcy process by the end of November.

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The pandemic has also posed challenges for Westpack, leading to the closure of major customers, bankruptcy filings, and the relocation of operations abroad. To sustain the business during this period, Westpack had to reduce its full-time workforce and secure funding through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL). However, the company encountered a significant financial strain in late 2022 due to the installation of new equipment and a sharp increase in the interest rate of their Small Business Administration-backed loan. Additionally, customers signaled reduced demand for 2023, further exacerbating Westpack’s financial difficulties.

These financial pressures have depleted Westpack’s cash reserves, particularly as the company has been operating at lower sales levels. Inflationary pressures on labor costs and the need to retain employees have further contributed to the reduction in cash reserves.

Given the imminent closure of Westpack, a local competitor interested in expanding its capacity approached Richard Wilson as a potential buyer. The two parties executed an asset purchase agreement, setting the stage for a potential stalking horse bid in the bankruptcy auction process.

Westpack currently employs approximately 13 full-time employees and hires three to four part-time seasonal workers during peak production periods. From July 2021 to June 2022, the company reported nearly $3.25 million in gross revenue.

Westpack’s largest creditor is the Small Business Administration’s Office of District Counsel in Detroit, with a secured claim exceeding $1.28 million arising from the company’s Economic Injury Disaster Loan in 2020. Huntington National Bank also holds a secured claim of $499,431 related to a loan from 2016. There are additional local creditors with significant unsecured claims, including Michcor Container Inc., G&T Industries, Intra City Dispatch, Holland Pallet Repair, Color Hub, Kentwood Packaging, RJ Woodworking, Action Packaging, and Pratt Industries Inc.

Westpack acknowledges the need for immediate cash collateral and asserts that a denial of collateral could cause irreparable harm to its operations, business relationships, and employee retention.

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