Water Gremlin Co., rattled in recent years by pollution scandals, has filed for Chapter 11 bankruptcy protection and is in the process of trying to sell the company.
The White Bear Township-based company, founded in 1949, makes lead battery terminals and fishing sinkers. Water Gremlin had significant clashes with regulators in 2019 over pollution from its facility. The company had to pay more than $7 million in fines to the Minnesota Pollution Control Agency (MPCA) over toxic air emissions.
The MPCA's commissioner at the time said the company "put people's health at risk." The MPCA levied another $325,000 fine in 2021 over alleged violations of hazardous waste and industrial storm water rules.
The MPCA issued a new air emissions permit with "more stringent emissions limits and operating requirements" to the Water Gremlin facility in June.
In July, Tokyo-based Okabe Co. Ltd., parent company of Water Gremlin, said that the litigation could lead to Water Gremlin "incurring substantial liability." An affidavit filed in the bankruptcy case cites possible liability from lawsuits related to the pollution cases and a decline in sales. The company's sales fell from $57.8 million in 2018 to $46.8 million in 2022, according to the court papers.
The company is "evaluating multiple compelling offers from interested parties to acquire substantially all of the assets of its U.S. and European divisions," Water Gremlin said in a statement. The bankruptcy filing can drive a sale in the "most efficient manner." The related Water Gremlin Holdings Inc. and WG Sub entities also have filed for bankruptcy protection.
"I am advised and it is my belief that the debtors likely could have accomplished a restructuring outside of bankruptcy if not for the tort claims," said Bradley Hartsell, president of Water Gremlin, in the affidavit.
And while the company has assets of $65.7 million right now and liabilities of only $27.8 million, it also said Mizuho Bank, which is its largest unsecured creditor, is no longer making a line of credit available to Water Gremlin. The company owes Mizuho $21.6 million, according to court papers.
Okabe said the 178-employee company had a net loss of $12 million in 2022.
"The profitability of the battery terminal business in the United States has severely deteriorated, we have identified the battery terminal business in the United States as an unprofitable business," Okabe said in a statement.
Water Gremlin also in the court papers blamed loss of market share on negative news coverage surrounding the pollution cases.
Water Gremlin's bankruptcy filing does not yet include many details of its financial straits. It indicates that the company has somewhere between 200 and 999 creditors, with liabilities potentially as high as $50 million.
The company's 30 largest unsecured creditors are owed $23.9 million.
The second largest creditor, Eagan-based environmental services provider Gopher Resource, is owed more than $516,000. Other creditors include Ramsey County, Xcel Energy, Masterson Personnel in Plymouth, White Bear Township and UnitedHealth Group.
Water Gremlin said in a statement: "Chapter 11 will also provide an appropriate forum for definitively resolving pending litigation related to the company's past use of the solvent [trichloroethylene, or TCE] in its manufacturing process, which it voluntarily discontinued in early 2019," the company's statement said.
Water Gremlin Aquila Co., the company's European division, is not part of the bankruptcy proceedings.
