No layoffs expected as bankruptcy is approved for Schenectady business

Section: Business,  Page: D1

Date: Tuesday, October 16, 2012

SCHENECTADY -- A federal bankruptcy judge in Delaware approved the Chapter 11 reorganization plan for Contec, a Schenectady-based company that repairs equipment for the cable TV industry.

The plan's confirmation relieves Contec of hundreds of millions of dollars in debt, giving the company much-needed breathing room as it faces lower revenues and thinning margins as consumers have increasingly sought out streaming media on the Internet for entertainment instead of television.

As a result, cable companies are going through less equipment than they had in the past.

Contec was founded in 1978 in Schenectady.

At one time, the company had 500 employees locally, but today, Schenectady is home only to its engineers, administrative, sales and customer service employees.

The majority of its repairs are done in Mexico, where the company has more than 2,100 employees.

Today, Contec has 177 U.S. employees. In addition to the Schenectady office, the company has locations in Seattle and in Edison, N.J.

Under the bankruptcy plan, Contec does not plan on laying off any employees, and it is expected that the company's debt will drop from $350 million to $52 million.

Before the plan was approved on Oct. 4 in U.S. Bankruptcy Court in Delaware, Contec's interim chief financial officer said that a Chapter 11 restructuring was much better financially for its creditors because a liquidation of the company's assets would only generate between $16 million and $21 million.

The Contec bankruptcy plan is a so-called prepackaged plan that was worked out with lenders and creditors before the filing was made back in August. Such prepackaged plans typically go much more quickly than traditional bankruptcies because many creditors already believe the plan is in their best interests.

Boston-based Bain Capital acquired Contec in 2008 from American Capital Strategies, which had purchased it in 2006.

It wasn't clear how Bain fared in the reorganization. The Wall Street Journal had reported in August that it likely would lose its investment in Contec in a prepackaged bankruptcy.

Bain paid $525 million for Contec, including $215 million in equity and $180 million in debt, according to a Dow Jones report.

The company repairs millions of set-top boxes that cable TV companies put in customers' homes as well as other equipment such as modems. In general, broken equipment is shipped to the company's Mexico facility, repaired and shipped back. A smaller number of repairs are done in the United States.

Another factor for the decline in revenue, Contec said, was that a year ago, one of its large customers stopped repairing set-top boxes and instead bought new units with more capabilities. - 518-454-5504 - @larryrulison