With financing tight, Perrysburg tool firm must close up shop

4/30/2009

After nearly a quarter-century in business, Clarke Power Products Inc. in Perrysburg had nailed down sales of more than $23 million a year.

The cordless drills and other tools it imported from China and other places could be found in Menards Inc., Sears, Roebuck & Co., and Tractor Supply Co.

But in recent days, a new message has greeted callers to Clarke's offices on Glenwood Road: "Due to the trying economic times, Clarke Power Products is in Chapter 11 bankruptcy. We are no longer selling or servicing products. We have no staff members available to take your call."

Only a handful of the firm's 40 employees remain, according to Raymond Beebe, company attorney. They are selling remaining products and winding down operations.

When the firm filed for Chapter 11 in U.S. Bankruptcy Court in Toledo in January, officials hoped to restructure. But they were unable to secure bank financing and were forced to liquidate.

Such tough going in getting financing, even for businesses that stay current on their loan payments, is becoming more commonplace in today's economic environment, Mr. Beebe said.

"If there is any kind of nervousness, banks are exercising their rights not to renew," the lawyer explained. Sometimes, it is the simple fact that the borrower is in a troubled industry.

"That can be catastrophic for a business because there aren't other places to go now," he said.

Craig Valentine, company founder, owner, and former CEO, is bitter about the situation.

KeyBank refused to renew the firm's line of credit when it expired late last year even though Clarke had not missed a payment and was in compliance with loan terms, he said. Officials of Clarke Power were unable to find a new lender in a tight credit market.

A spokesman in Cleveland said KeyBank has a policy of not commenting on individual customers.

"Banks are lending money, but they're more cautious than they were two years ago," said Dave Reed, who leads commercial lending at Toledo's Signature Bank.

Clarke owes Key about $9 million, according to documents in the bankruptcy case.

Mr. Valentine conceded that the firm hit a rough patch last year. Sales slipped 20 percent in 2008 from $29 million the prior year.

And for a time, Clarke was unable to pass on to customers huge increases in the costs of commodities such as aluminum, oil, and steel.

"But that had stabilized by the end of the year," he said.

"We were on track to claw back the sales deficit."

The firm owes $12.1 million to creditors, but has $15.1 million in assets, bankruptcy filings show.

It was founded in 1985 by Mr. Valentine and British businessman John A. Clarke, owner of Clarke International in Essex in England. Mr. Clarke holds a 75 percent stake in the firm. Mr. Valentine owns the rest.

At one point, the firm was selling more than 400 products, including toolboxes, welding devices, drills, and saws. It marketed inexpensive products aimed at do-it-yourselfers under its own name and those of customers such as Sears.

Mr. Valentine, 56, started out as a salesman for Toledo's former Champion Spark Plug Co.

Mr. Valentine is disappointed about how things turned out.

"I feel betrayed by the bank," he said, claiming Key not only refused to renew loans but wouldn't give him sufficient time to find a buyer for the company.

"I spent 24 years building a business ... with the idea of, at some point ... realizing something for my sweat equity."

He left the company in February. Jim Mahaly, longtime operations chief, took over.

Mr. Valentine isn't sure what will happen to product warranties issued by Clarke Power.

Few company veterans have found work. "I feel for my employees," the former CEO said. "I have some fantastic employees who are still looking for jobs. Not many have found them."

Contact Gary Pakulski at:

gpakulski@theblade.com

or 419-724-6082.