Heatway files Chap. 11; Watts to buy company

Heatway is just warming up. The developer of radiant heating and snowmelting systems has a plan for itself following a court case lost to Goodyear: It has filed for Chapter 11 bankruptcy protection under the U.S. Bankruptcy Code and plans to sell the assets of the company to publicly traded Watts Industries.

"We've been trying to acquire them for three years, really, but this situation with Goodyear had to come to an end first," said Michael Fifer, president of Watts' North American division.

Chiles Power Supply Company, which does business as Heatway, filed Chapter 11 Feb. 25, said Heatway owner and Vice President Dan Chiles.

The company has signed a letter of intent for Watts to purchase both Heatway and Bask, a separate company with similar ownership (Mike and Dan Chiles own both companies).

The terms of Watts' purchase offer were not available at press time, but in time, they will probably become public as part of the bankruptcy proceedings, Dan Chiles said.

Norm Pressman, a St. Louis-based attorney who is handling the bankruptcy filing for Heatway, said the firm has about 100 unsecured trade creditors who are owed about $200,000. Goodyear, also an unsecured creditor, is owed $2.7 million as a result of the judgment against Heatway in the Goodyear lawsuit over Entran 2 hose.

Heatway owes Goodyear, the manufacturer of Entran 2, for the hose it purchased, which Heatway said was defective and caused its radiant heating systems to malfunction. A jury in Ohio ruled that 25 million feet of Entran 2, a hose manufactured by Goodyear for use by Heatway, was fit for ordinary use.

Heatway had maintained that the hose was faulty and that it was the hose that was causing high-dollar, Heatway-designed radiant heating systems to fail.

Other creditors include Heatway's current supplier of hose, Dayco, that is owed $1 million, and a law firm that is owed $400,000, Pressman said. So far, there is one secured creditor, Finova Capital Corp., which is owed about $1.067 million, and whose debt is secured by all the assets of the company: its building, its furniture and equipment, etc.

According to the bankruptcy filings, Heatway has about $5.27 million in total assets and about $5.79 million in total liabilities.

Two other companies have looked at Heatway for purchase, Pressman said, but Chiles said that the Watts offer was the best. Neither Chiles nor Pressman know at this point how the Bask company will be acquired.

Bask produces a product called Heatweave, an electrical heating system that goes under tile flooring in a small area, such as a bathroom, Chiles said. The product has a larger market than the radiant heating systems, which pump warm liquid through hoses installed in floors.

The radiant heating systems are most popular now in snowmelting and in cold regions of the country, such as Colorado and New England.

The Bask product can be used in southern states, where the warm climate may not require the more elaborate radiant heating system, Chiles said.

The Watts acquisition will not only help Heatway with its bankruptcy case and help satisfy many of its debts, it will also help the business grow in Springfield, Chiles said.

"The character of the Watts company is a great fit for us. Much of what they do is very compatible with our business here," Chiles said.

Watts was founded in 1874 and has its headquarters outside Boston, Mass., Fifer said. The company, which had $520 million in sales in 1999, is primarily involved in manufacturing valves for plumbing and heating industries.

The company makes many of the valves used in radiant heating systems, and it was interested in Heatway because of its distribution system and because it is already established in a business Watts wants to be in, Fifer said.

"This is the fastest and best way for us to get into the radiant heating systems business," Fifer said.

Though the sale will take place under the bankruptcy court's direction, Fifer said he is confident the sale can close within six months at the outside, and hopes the sale will be complete in 75 days.

Watts is in the radiant heating systems business in Europe, supplying whole systems there, Fifer said, but the company has not yet entered that market in the United States. Watts also manufactures hose for the radiant heating system industry in Europe, but it will probably not manufacture hose in this country anytime soon, Fifer said.

Watts has 2,900 employees worldwide and conducts about 70 percent of its sales in the United States. It has seven manufacturing plants throughout the United States and Canada, and about 90 warehouses.

The company manufactures components for the plumbing and heating industry under the Watts brand name.

"It's a very well-known name. I promise you most plumbers know the name Watts quite well," Fifer said.

The company is traded on the New York Stock Exchange under the symbol WTS.

The first meeting of creditors in the Heatway case is 1:30 p.m. April 5. The company has until June to file its reorganization plan, but Pressman said he hopes to have it completed ahead of that deadline.