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Knight-Celotex Files For Chapter 7 Bankruptcy In Northfield, Illinois

Although building products manufacturer Knight-Celotex originally filed for Chapter 11bankruptcy, which would allow the Northfield, Illinois, company to reorganize and remain open, the company has now switched to a Chapter 7 bankruptcy filing, which involves liquidation.

Knight-Celotex, which makes fiberboard insulation sheathing and sound-deadening materials, originally declared bankruptcy on April 6, 2009, after defaulting on a $34 million dollar loan from Bank of America. At the time that they filed, the company had $357,000 in cash and inventory valued at $7.2 million. Revenue in 2008 was $79 million.

The case was filed in Chicago, Illinois at the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division. The case is being overseen by US Bankruptcy Judge Pam Hollis. This week, Hollis fielded an emergency request by Bank of America to switch the bankruptcy proceedings from Chapter 11 to Chapter 7 after it was discovered that Knight-Celotex CEO James Knight was resigning from his position. Bank of America also told Hollis that $1 million in unauthorized expenses were incurred.

The Court appointed Mr. Barry A. Chatz, Attorney at Law with the firm of Arnstein & Lehr, LLP as Trustee. Chatz believes that there is strong interest in the company and hopes that Knight-Celotex will be sold soon. The Knight-Celotex plant in Danville has suspended operations, as officials wait and hope to find a buyer. The company's vice president has told workers that they would work out payroll and benefits issues in the coming days.

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