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Kleen Laundry Files for Bankruptcy Protection



Valley News Business Writer
Wednesday, July 27, 2016

Lebanon — Kleen Laundry, a household name in the Upper Valley whose roots go back to the 19th century, has filed for bankruptcy protection, citing a “challenging time” with its primary commercial customer base — hospitals to which it provides linen and uniform cleaning services.

Kleen said the Chapter 11 reorganization, filed in U.S. Bankruptcy Court in Manchester on Monday, would allow it to continue operating while it renegotiated its debt.

No details were available on Tuesday as to the size of Kleen’s debt or the amount of its debt payments. But the company has gone through two major transactions in past 10 years — the first in a 2006 sale to a private investor and the second in a merger with a Manchester laundry service company in 2012.

The Lebanon-based cleaner, which operates a plant on Foundry Street, was quickly granted permission by the bankruptcy court judge to use $52,000 in cash collateral to pay wages and state and federal taxes, in addition to $20,000 to pay for liquefied natural gas to power its equipment.

Employees at the Lebanon plant first learned that something was amiss at the company when they came to work on Tuesday morning to collect their paychecks and were told to return after 2 p.m.

Word spread that the reason for the delay was because the company had filed for bankruptcy.

“All I can say is everyone has been paid,” Kleen plant manager Robin Longley said by phone late Tuesday. He declined further comment.

In a letter to customers dated Monday, Kleen said the company is “in the midst of a challenging time in the health care market” and has “taken proactive steps to reduce costs, enhance efficiency and streamline our operations.”

The company said it had “reached a preliminary understanding with our senior lender on the terms of a financial restructuring of our balance sheet that is expected to significantly reduce our long-term debt.”

In a telephone interview, Kleen President Dennis Kim said while customer demand for its services remains high, a combination of competition and increasing cost pressures at its health care customers have combined to limit Kleen’s ability to pass through rising operations costs.

“The hospitals are very cost conscious,” he said. “They are under constantly increasing pressure to reduce their costs.”

Kim said he expected the bankruptcy process to take between three to six months.

Kleen provides linen and laundry service to 26 northern New England hospitals, including hospitals in the Dartmouth-Hitchcock network.

Kleen formerly serviced flagship Mary Hitchcock Memorial Hospital, but lost that contract several years ago.

The company also operates laundromats and retail dry-cleaning services at outlets in Lebanon, West Lebanon, White River Junction, Hanover and Claremont.

Kleen submitted to the bankruptcy court a budget of about $1.9 million in operating expenses through Oct. 21. The company’s payroll is estimated to run about $58,000 per week, according to the filing.

The bankruptcy filing also listed a total of approximately $2.3 million in unsecured claims held by the 20 largest creditors, including $1.7 million owed to the Thomas L. Gosselin Family Trust.

The Gosselin family were the longtime owners of Kleen Laundry before selling a majority stake in the company to Kevin Melia in 2006. Six years later, Melia merged the company with Sterling Linen Services, a unit of Manchester-based Envoy Services.

John Lippman can be reached at jlippman@vnews.com or 603-727-3219.