Posted 12-08-2004 at 13:57:06
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Tuesday, November 16, 2004
Lionel trains files for bankruptcy
By Tom Becker / Bloomberg News
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CHESTERFIELD TWP. -- Lionel LLC, a 104-year-old maker of model trains that is part-owned by rock musician Neil Young, filed for bankruptcy protection after a U.S. jury found the company used designs for toy locomotives stolen from a rival.
The Chesterfield, Michigan-based company listed $55 million in debts and assets of $42 million in papers filed with the U.S. Bankruptcy Court in New York. A Detroit jury in June ordered the company and its subcontractors to pay $40.8 million for obtaining drawings and plans for a toy train that were stolen from a subcontractor of closely held M.T.H. Electric Trains.
"The size and weight of this judgment is just too much for what is essentially a small business to bear," Jerry Calabrese, Lionel's chief executive, said in a statement. "Bankruptcy will not only allow us to pursue an eventual reversal of this unfair decision, it will enable us to create, manufacture and ship our products in our normal and usual way."
Under bankruptcy law, the $40.8 million judgment is treated as an unsecured claim. Distribution to unsecured creditors in New York bankruptcy cases this year averaged about 30 cents on the dollar in most cases, according to data compiled by Bloomberg. PNC Financial Services Corp. is the largest secured creditor with a $31 million claim, according to court documents.
It's Lionel's second bankruptcy filing. It sought court protection in 1991, after which Young took a stake in the company. He holds a 20 percent interest now, according to court papers. Lionel spokeswoman Kristin Celauro declined to comment on today's filing.