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iGPS files for bankruptcy protection, reorganization moving forward

Intelligent Global Pooling Systems, an Orlando, FL-based company that supplies reusable plastic pallets to various industries, filed for bankruptcy protection in early June and is apparently negotiating the sale of its assets to a third party, which plans to emerge as iGPS Logistics LLC, a joint venture formed by private equity firms and others.

The sale must be approved by the U.S. Bankruptcy Court in Wilmington, DE, and is subject to higher and better bids. In court filings, iGPS indicated that it hopes to complete the sale by the end of July.

The joint venture was listed in the Chapter 11 bankruptcy filing as private equity firms Balmoral Funds LLC and One Equity Partners, as well as individuals Jeff and Robert Liebesman.

One Equity owns a controlling interest in a pallet manufacturing company, Schoeller Alibert, that is one of iGPS's largest creditors, with a reported claim of more than $5.4 million.

In a press release that announced the bankruptcy filing, IGPS said it planned to continue operating without interruption and said customers will not be affected. The company "will continue to honor and service its existing clients and new client programs," according to the release.

Crystal Financial LLC is providing the company with up to $12 million in debtor-in-possession financing and exit financing, according to court filings. The company has between $100 million and $500 million in assets, according to published reports. The company apparently defaulted on its loans because it lost as many as 1.5 million pallets, which is about 15 percent of its total inventory.

IGPS is in the business of renting recyclable plastic pallets and using a pool approach to circulate those pallets among its users. It was founded in 2006, with Bob Moore, a former chief executive officer of CHEP, at its helm. Its point of differentiation was a lightweight plastic pallet equipped with RFID technology.

It did make inroads in the food and beverage business initially, including capturing some produce industry accounts. However, according to several industry sources that requested anonymity, iGPS did not sustain that business and lost some key accounts in the last several years. News reports indicate that among its lost accounts were ConAgra Foods Inc. and PepsiCo.

The plastic pallet was much more expensive than some of its competitors operating in the reusable pallet space, so experts say it is more suited toward high-end goods, such as electronics, rather than food or beverages.

Published reports say the iGPS pallet costs about three times as much ($60 to $20) as a reusable wood pallet. The business model calls for those pallets to have much longer life with many more trips before they have to be repaired or replaced.

Another industry observer said iGPS did not account for the initial "borrowing" of the pallets for internal purposes that tends to happen when this type of product hits the market.

Initially, users don't return all the pallets to the pool, instead reusing them within their own operations. This observer said firms operating in the space have to reach a critical mass where there are sufficient pallets in the pipeline so that the disappearance of pallets is negligible. Losing 15 percent of their total volume is not sustainable, he said.