AGAWAM -- Southworth Co., the 178-year-old paper maker that shut down abruptly one month ago, filed for federal bankruptcy protection on Thursday, according to court documents that also show the company has $9 million in underfunded pension liability.
Southworth asked the court to use money the company has on hand to pay employees more than $445,000 in back wages and benefits and for the court's permission to sell $3.19 million in finished but not yet shipped paper.
Getting that paper to market, and getting paid for it, would require Southworth to put at least some employees back to work, it says in court papers.
The company had about 120 employees in Agawam, the Turners Falls section of Montague, and in Seattle.
U.S. Bankruptcy Court Judge Elizabeth D. Katz will conduct a hearing on the wage issue 11 a.m. Monday in Worcester, according to court documents.
Southworth is asking for Chapter 11 bankruptcy protection, a provision of the law that gives debtor companies time by shielding them from lawsuits filed by creditors, as well as a way to get out of some contracts. This can give a company the opportunity to reorganize. Chapter 11 bankruptcy cases may also convert into a Chapter 7 bankruptcy cases, in which a company is liquidated.
Southworth said in court papers it was forced to shut down Aug. 31 when it lost a line of credit it was using to finance continuing operations.
Southworth told the court it has $16.3 million in total assets, including $3.19 million in inventory and $3.9 million in real estate. The warehouse and offices at 265 Main St. in Agawam is worth $1.7 million, according to the filing, and the paper mill at 36 Canal St. in Turners Falls is worth $2.24 million.
Other assets include $1.9 million in accounts receivable and $7 million in equipment, motor vehicles, furniture and tools. The value of intellectual property like copyrights, patents and internet domain names is not specified.
Bankruptcy papers list $17.84 million in debt, including the $445,000 in unpaid wages and benefits. Court papers list 114 employees owed money.
Also under debts, court papers list $9 million in underfunded pension liability; $1 million to ACF Finco I LP of Garden City, New York; $2.23 million to Byline Bank of Elm Grove, Wisconsin; and $4.8 million in unsecured trade debt.
That unsecured debt includes, according to the papers, $224,000 in back taxes owed the town of Montague.
No debts to the town of Agawam are listed. But on Friday Agawam treasurer/collector Laurel Placzek said Southworth owes the town $74,529, a figure that includes a $24,226 bill that went out Friday. Placzek said bankruptcy cannot wipe out the tax debt.
Attorney John P. Connor, of Stobierski & Connor in Greenfield, represents two former Southworth employees who have sued Southworth in federal court claiming they are owed unpaid wages and benefits. Connor said he's been contacted by 48 more Southworth employees since the lawsuit went public.
The bankruptcy places a stay on litigation, but Connor said the lawsuit he filed on behalf of workers also names individual stockholders and executives as defendants. There is no stay protecting them.
But Connor said the outcome of Monday's bankruptcy hearing might help get employees at least some of what they deserve to be paid.
Southworth Co. traces its history to 1839, when Wells Southworth built a mill to manufacture fine papers in West Springfield. The company bought the mill in Turners Falls, once the home of Esleeck Paper Co., in 2006.
In recent years it has done business as Turners Falls Paper and as Paperlogic, moving into new markets as demand for office paper declined. That included paper made from hemp and from nanofibers -- extremely small wood particles -- that has special properties for baking and health care applications.
In 2012, Southworth sold its mill in West Springfield and its venerable brand of business paper to Neenah Paper of Wisconsin, and production of that paper shifted to Neenah's mills.
That same year, Southworth purchased Madison Park Group, a greeting card and gift box company in Seattle. Madison Park shut down in August as well.