Judge Approves Barton Cotton Sale

April 15, 2009       Mark Hrywna      

Clearing the way for the closing to occur next week, a Maryland bankruptcy judge today approved the sale of direct response marketing firm Barton-Cotton.

The Columbia, Md.-based firm will become a sister company of Tulsa, Okla.-based ResourceOne and ResourceOne Technologies in Broomfield, Colo. Jim Moore, CEO of ResourceOne,  will purchase the firm’s operating assets for $3.6 million and two properties for another $3.2 million.

Mark Friedman of Baltimore, Md.-based DLA Piper, the court-appointed bankruptcy trustee, said he expects the closing to take place by the beginning of next week. “Hopefully Barton-Cotton will see a new chapter in its existence. Today is certainly a step in giving it an opportunity to do that,” he said.

Approximately 40 Barton-Cotton employees have been working to fulfill existing commitments since the company filed for bankruptcy more than two months ago. “The judge noted how unusual it was for operations to occur during a Chapter 7 bankruptcy,” Friedman said, and for a sale to be accomplished as an ongoing business. Permanent management will be in place after the closing, Friedman said, with a quarter to a third of employees coming back.

Moore, who will serve as interim CEO until a permanent CEO is hired, anticipates roughly the same number of employees at Barton-Cotton, about 200, who were with the firm prior to bankruptcy.

The deal will include the sale of two Barton-Cotton facilities in Baltimore, one on Parker Road, which will become the corporate offices, for $1.984 million and another on Constance Avenue for $1.216 million.

Founded in 1928, Barton-Cotton filed liquidation paperwork on Feb. 9 on four companies: Barton-Cotton Inc., Barton-Cotton Sales Corp., Barton-Cotton Holding Corp., and Barton-Cotton Real Estate Inc.

American Capital Strategies, which trades on NASDAQ under ACAS, acquired a controlling interest, about 83 percent, in Barton-Cotton nearly three years ago for $144 million.

In filings with the Securities and Exchange Commission, American Capital reported $62.7 million in debt tied to Barton-Cotton. The firm’s fair value was estimated to be $12.4 million.

American Capital announced in December various cost saving measures in response to economic and market conditions and that the changes would affect both American Capital and its wholly‑owned European affiliate, European Capital Financial Services Limited.