Intelligent Global Pooling Systems (iGPS) the world's largest pooler of plastic pallets, filed for bankruptcy protection last week after lenders reportedly declared the company in default of its loan covenants because it couldn't account for 15 percent of its 10 million pallets.
According to legal website Thomson Reuters News & Insight, lenders concluded that the apparent loss of 1.5 million iGPS pallets in 2011 put the Orlando-based company in default of its covenants. At that point, lenders began demanding payments from iGPS, according to the website, which cited documents filed in federal bankruptcy court in Delaware.
iGPS said it agreed to sell its assets to a joint venture known as iGPS Logistics LLC. The venture includes the private equity firm Balmoral Funds; One Equity Partners, the private investment arm of JPMorgan Chase & Co.; and Jeff and Robert Liebesman of the returnable packaging company Palogix International. The sale is subject to higher and better bids and Court approval.
"After careful analysis, we determined that this sale of the company to iGPS Logistics is the most advantageous option for iGPS' customers, employees, suppliers, and other stakeholders," Dick DiStasio, CEO of iGPS, said in a statement. The company said it plans to continue operating without interruption during the sale period.
iGPS declined any further comment beyond the statement.
According to court documents cited by Thomson Reuters, iGPS declared bankruptcy in part because of the loss of the pallets and in part because it received a large number of damaged pallets from its manufacturer Schoeller Arca Systems Inc (SAS). (One Equity is a shareholder in SAS.)
iGPS was launched in 2006 with Bob Moore, former head of pallet pooling giant CHEP, as its CEO. It billed itself as providing a plastic pallet that was 30 percent lighter than wood and could be tracked using RFID technology.
iGPS immediately began vying with CHEP for business, particularly in the grocery and beverage segments, and landed big names such as Kraft Foods, SC Johnson, WalMart Stores Inc., and Costco Corp.
In 2011 and 2012, however, chinks began to appear in the company's armor. Two of its largest customers, ConAgra Foods Inc. and PepsiCo. went back to using CHEP as their pallet pool provider. It is unclear if the defections were due to any business impact surrounding the missing pallets.
What is clear is that iGPS knew from the start that lost pallets could turn into an expensive proposition. Each plastic pallet costs around $62 each, three times more than wood ones. As a result, iGPS decided to embed RFID tags on its pallets to better track their location.
In a 2007 DC Velocity article, then CEO Moore explained, "Internally, for very selfish reasons, we can't afford to lose [our pallets]."
Plastic pallets are considered more durable than their wood counterparts. They are, however, more expensive to manufacture and thus command a higher price tag.