SWC Industries: $35M Sale to MSI Automate and Asbestos Trust
ElevenFlo Research
June 6, 202614 min readUpdated September 8, 2026
SWC Industries LLC and 12 affiliated debtors filed chapter 11 on November 13, 2024 in the U.S. Bankruptcy Court for the Northern District of California, San Jose Division, under lead case 24-51721 before Judge M. Elaine Hammond. The filing combined two distinct problems: a set of going-concern industrial businesses anchored by SencorpWhite that needed a buyer, and a separate pool of decades-old environmental and asbestos exposure traced to former divisions that no longer operated. The Debtors built the case around that split from the first day, dividing the 13 entities into an operating group and a "Legacy" group and running a marketing process toward a plan-sponsor sale rather than a standalone auction.
The result was a joint chapter 11 plan that paired a §363-style sale of the operating businesses to MSI Automate LLC with a liquidating trust for the legacy estate and a non-§524(g) asbestos trust funded out of the secured lender's recoveries. Judge Hammond confirmed the Third Amended Plan on May 7, 2025 over the rejecting vote of the asbestos claimant class, and the plan went effective on May 27, 2025 — a little over six months after filing.
U.S. Bankruptcy Court, Northern District of California (San Jose Division)
Case Number
24-51721
Petition Date
November 13, 2024
Confirmation Date
May 7, 2025
Effective Date
May 27, 2025
Judge
Hon. M. Elaine Hammond
DIP Facility
$7.5 million new-money multi-draw term loan from JMB Capital Partners Lending, LLC at 11.0%, priming WCMC
Plan Sponsor
MSI Automate LLC (acquired the OpCo Debtors)
Claims Agent
Stretto, Inc.
Case Snapshot
Bifurcated Debtor Structure and Legacy Liabilities
The enterprise traces to Packaging Industries Inc., founded in 1947, with the modern partnership structure dating to 1987, when SWC Limited Partnership — then named Connell Limited Partnership — was formed to acquire operating divisions from Avondale Industries, Inc. Over the following decades the company divested the original Avondale operations and built out medical, scientific, packaging, materials-handling, and warehouse-logistics businesses — including the 2015 acquisition of SencorpWhite that anchored the operating group — and operated from California and Massachusetts.
The 13 debtors split into two groups that drove the entire case architecture. The going-concern operating businesses — the "OpCo Debtors" — were SencorpWhite, Inc., SWC CeraTek LLC, Accu-Seal SencorpWhite, Inc., IITI Acquisition LLC, SWC White Systems LLC, Intek Integration Technologies, Inc., and Minerva Associates, Inc. The remaining "Legacy Debtors" — including SWC Limited Partnership, SWC Holdings, LLC, Yuba Heat Transfer, LLC, SWC Aluminum Properties, L.L.C., and SWC Tool Properties, LLC — housed legacy assets and the long-tail environmental and asbestos liabilities tied to three former divisions of SWC LP f/k/a Connell Limited Partnership: Yuba Heat Transfer Corporation, Danly Machine Corporation, and Wabash Alloys, LLC.
The Debtors carried contingent, disputed, and unliquidated tort, environmental, and indemnification claims dating back as far as 1955, spanning roughly 20 states, yet stated that no debtor had ever suffered an adverse judgment on the asbestos claims and that the SencorpWhite operating subsidiaries had never been implicated in asbestos suits. That clean operating record later became the stated basis for declining a §524(g) channeling injunction. The company had engaged Getzler Henrich & Associates LLC in September 2024 to manage liquidity and restructuring planning, with the firm's David R. Campbell installed as Chief Restructuring Officer.
Macro Pressure, Brookline, and the Decision to File
The first day declaration attributed the filing to a "steady decline" over the prior 36 months driven by four compounding pressures. Inflation and rising interest rates increased the cost of materials, energy, and labor, straining liquidity and cash-flow projections across the enterprise. The Debtors were also unable to secure long-term financing for the entities outside the SencorpWhite group: existing lender Brookline Bank declined to extend its maturities, and the equity holders and WCMC Investments were unwilling to provide additional direct financing.
The legacy liabilities compounded the liquidity problem. The Debtors faced numerous environmental and asbestos lawsuits across approximately 20 states, a burden they said had been aggravated by legislative changes including a 2015 Illinois statute-of-limitations amendment. Separately, the Debtors had been prosecuting "Coverage Litigation" against affiliates of Allianz SE to recover funds under multi-year general liability policies that the Debtors contended had been wrongly denied — insurance recoveries that would later be preserved as an estate asset rather than monetized before filing.
WCMC Secured Debt and Brookline Letters of Credit
WCMC Investments, LLC sat at the center of the capital structure in two distinct capacities. On the secured side, WCMC held prepetition secured loans of $26,479,570 in aggregate principal plus accrued interest, documented across individual notes bearing the Applicable Federal Rate (Mid-Term) — roughly 0.39% to 2.99% — with a default rate of an additional 2% and maturities running from November 7, 2028 to July 6, 2031. That secured debt was collateralized by a first-priority security interest in substantially all personal property of SWC LP and SWC Holdings, excluding cash held at Brookline Bank and the payroll and benefits accounts.
WCMC was also the largest unsecured creditor. It held the SencorpWhite Notes — $26,172,737 of unsecured debt bearing 3.85% interest and maturing January 1, 2032 — which became the largest OpCo general unsecured claim in the case. Rounding out the structure, Brookline Bank held $1,450,000 in contingent letter-of-credit reimbursement obligations secured by cash collateral in the bank's possession, and trade payables totaled $2,408,344.
JMB Capital DIP Facility and WCMC Priming
To fund the case, the Debtors obtained a postpetition senior secured priming DIP facility from JMB Capital Partners Lending, LLC. The facility, filed as a motion on January 8, 2025, provided up to $7.5 million of new money in a multi-draw term loan priced at 11.0% per annum payable in cash monthly, with a default rate of an additional 5.0% and a maturity no later than June 30, 2025. The facility carried milestones requiring entry of the DIP order by February 3, 2025 and compliance with an approved budget, along with a customary professional fee carve-out.
The DIP primed WCMC's prepetition liens. As adequate protection, WCMC received replacement liens on the DIP collateral solely to the extent of any diminution in value, subordinate to the carve-out, permitted prior liens, DIP liens, and DIP superpriority claims. The Official Committee of Unsecured Creditors objected to the DIP motion on January 24, 2025, but the dispute was resolved through negotiation, and Judge Hammond entered the final DIP order on January 31, 2025, authorizing the financing, granting the priming liens, and approving the use of cash collateral.
Gordian Marketing and the MSI Automate Sale
The sale process began before the petition. Led by Gordian Group, the Debtors launched a formal marketing process in October 2024, contacting approximately 144 strategic and financial parties, of whom 65 executed non-disclosure agreements, with initial indications of interest due December 12, 2024. The bidding procedures motion, filed November 25, 2024, set an integrated dual-track timeline with no stalking horse at filing, binding bids due February 20, 2025, an auction set for March 3, 2025, and a combined sale and plan-confirmation hearing contemplated for March 10, 2025. Judge Hammond entered the bidding procedures order on January 31, 2025.
On February 10, 2025 the Debtors moved to designate MSI Automate LLC — a portfolio company of Grays Peak Capital — as stalking horse bidder, a step the company also announced publicly the same month. The amended disclosure statement valued the MSI Automate bid at approximately $35 million to $40 million, supported by bid protections consisting of a $750,000 break-up fee and expense reimbursement capped at $300,000.
Because no competing qualified bids materialized, the auction was cancelled. The Debtors instead filed an amendment to the purchase agreement on April 17, 2025 reflecting an improved bid from MSI Automate, which served as both stalking horse and successful purchaser of the OpCo Debtors and related assets. The Debtors also pursued two real-property dispositions outside the plan-sponsor transaction, including an order approving a sale to Beazer East, Inc. entered April 23, 2025 and a separate real-property sale approved April 21, 2025. The acquisition of SencorpWhite by Grays Peak Capital and Valore Ventures closed in late May 2025, and SencorpWhite later announced a $16 million equipment relocation project under its new ownership.
Plan Classification and Creditor Recoveries
The confirmed Third Amended Joint Plan bifurcated classification along the OpCo and Legacy debtor line, with separate class structures and projected recoveries for each estate. The treatment ranges disclosed in the amended disclosure statement are summarized below.
Class
Claim Type
Impairment
Projected Recovery
A-1
OpCo Other Secured
Unimpaired
100%
A-2
OpCo Other Priority
Unimpaired
100%
A-3
OpCo Trade Claims
Impaired
50% (cash, 12 months after Effective Date)
A-4
OpCo GUCs
Impaired
20%
A-5
OpCo Intercompany
Impaired
0% (cancelled or reinstated at Plan Sponsor election)
A-6
OpCo Section 510(b)
Impaired
0%
A-7
OpCo Interests
Impaired
0%
B-1
Legacy Other Secured
Unimpaired
100%
B-2
Legacy Other Priority
Unimpaired
100%
B-3
Legacy Secured Brookline
Impaired
100% (from Brookline Collateral Account)
B-4
Legacy WCMC Secured Notes
Impaired
0–10%
B-5
Legacy GUCs
Impaired
0–30%
B-6
Legacy Asbestos Claims
Impaired
Undetermined (Asbestos Trust mechanism)
B-7
Legacy Section 510(b)
Impaired
0%
B-8
Legacy Equity Interests
Impaired
0%
Plan Class Treatment
The plan singled out OpCo trade creditors for more favorable treatment than ordinary unsecured creditors. Class A-3 OpCo Trade Claims were slated for 50% recovery paid in cash by the plan sponsor on the date 12 months after the effective date, with any portion exceeding the trade claim treated as an OpCo GUC, while Class A-4 OpCo GUCs were projected at 20% from the OpCo GUC pool. On the legacy side, Class B-4 WCMC's secured note claims — allowed at $26,480,321 — were projected to recover 0% to 10% from the value of retained assets encumbered by WCMC liens, and Class B-3 Brookline's secured claim was set for full recovery solely from the Brookline collateral account if liquidated within one year of the effective date.
Non-§524(g) Asbestos Trust and the Affiliate Group Settlement
Rather than a §524(g) channeling injunction — the standard mechanism for resolving mass asbestos exposure in chapter 11 — the plan established a liquidating asbestos trust under §468B of the Internal Revenue Code, expressly not under §524(g) of the Bankruptcy Code. The trust covers all holders of "Asbestos Claims," defined as personal-injury and wrongful-death claims arising from exposure relating to the three former SWC LP divisions, with claims held by corporations, partnerships, or other business entities excluded. The Debtors' stated rationale was that no debtor had ever suffered an adverse asbestos judgment and the SencorpWhite operating subsidiaries had never been implicated, making a §524(g) injunction inappropriate.
The trust was funded through a settlement with WCMC's affiliate group rather than from operating proceeds. Under the plan, WCMC is deemed to assign 80% of its recoveries to the liquidating trust — with the first $1 million directed to an environmental reserve and the remainder to the legacy GUC pool — and 20% of recoveries to the asbestos trust as the "Asbestos Settlement Contribution." WCMC's OpCo general unsecured claims were allowed at $26,552,610. A separate liquidating trust holds the remaining non-OpCo assets, including the Allianz coverage-litigation rights and other unreleased claims, distributing to creditors after satisfying senior secured WCMC claims to the extent encumbered.
Confirmation, Asbestos Cramdown, and Insurer Settlements
The plan drew acceptances from most voting classes but ran into the asbestos claimants. The unimpaired classes were presumed to accept; impaired classes A-3, A-4, B-3, B-4, and B-5 voted to accept; and the equity and §510(b) classes were deemed to reject. Class B-6, the legacy asbestos claimants, voted to reject the plan, and Judge Hammond confirmed over that rejection on cramdown grounds under §1129(b). The confirmation order described "robust and arm's-length negotiations" with the affiliate group, the Committee, the EPA, Beazer East, the plan sponsor, and numerous insurance companies to resolve objections, including consolidated insurer briefs filed in opposition to confirmation.
The insurance disputes continued after emergence. The SWC Asbestos Personal Injury Trust pursued the coverage recoveries the Debtors had preserved, and counsel reported ongoing litigation and negotiation to fund the trust. The Debtors moved to approve a settlement on October 7, 2025, and Judge Hammond approved a settlement between the asbestos trust and Employers Mutual / Wausau on November 10, 2025, authorizing a free-and-clear buy-back of asbestos coverage policies under §363(f).
Key professionals. The Debtors retained Allen Overy Shearman Sterling US LLP as lead bankruptcy counsel and Binder Malter Harris & Rome-Banks LLP as local counsel, with Getzler Henrich & Associates providing interim management under an order entered December 18, 2024. Gordian Group served as investment banker, Foley & Lardner LLP and Gilbert LLP as special counsel, and Stretto, Inc. as claims, noticing, and solicitation agent. Robinson & Cole LLP represented the Official Committee of Unsecured Creditors, advised by FTI Consulting, and the firm's work on the case was later recognized with the "Chapter 11 Reorganization of the Year" award at the 24th Annual M&A Advisor Turnaround Awards.
Key Timeline
Date
Event
Sept 2024
Debtors engage Getzler Henrich; David R. Campbell appointed CRO
Oct 2024
Prepetition marketing launched with Gordian Group; ~144 parties, 65 NDAs
Nov 13, 2024
Chapter 11 petitions filed; first day declaration of David R. Campbell
Nov 25, 2024
Bidding procedures motion filed
Jan 8, 2025
DIP motion filed
Jan 24, 2025
Committee objection to DIP motion
Jan 31, 2025
Final DIP order, bidding procedures order, and bar date order entered
Feb 10, 2025
MSI Automate designated stalking horse bidder
Mar 3, 2025
Scheduled auction cancelled — no competing qualified bids
Stretto, Inc. serves as the claims, noticing, and solicitation agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.
Why did SWC Industries use a §468B asbestos trust instead of a §524(g) trust?
The plan established a liquidating asbestos trust under §468B of the Internal Revenue Code rather than a §524(g) channeling injunction. The Debtors stated that no debtor had ever suffered an adverse asbestos judgment and the SencorpWhite operating subsidiaries had never been implicated in asbestos suits, which they cited as grounds for not seeking a §524(g) injunction.
Who bought the SWC Industries operating businesses?
MSI Automate LLC, a portfolio company of Grays Peak Capital, acquired the OpCo Debtors led by SencorpWhite. MSI Automate served as both stalking horse and successful purchaser after no competing qualified bids materialized and the auction was cancelled.
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.
