Irving’s Kelly-Moore Paints Ceases Operations, Begins Business ‘Wind-Down’

Weighed down by years of asbestos litigation and settlement, along with other legal issues, Kelly-Moore said no new investors stepped forward to keep the company operating. Last week, Kelly-Moore announced a furlough of roughly 700 employees across its locations, as well as an operational halt at its manufacturing facility in Hurst.

Irving-based Kelly-Moore Paints has ceased operations immediately and will begin what it called an orderly, out-of-court wind-down of all of its business. Kelly-Moore moved to Irving in April 2023 from California.

“I’m extremely disappointed and saddened by this outcome, as the entire Kelly-Moore team made incredible efforts to continue innovating and serving the unique needs of professional painting contractors,” CEO Charles Gassenheimer said in a statement. “The ownership group’s commitment from day one was to fix the business if we could. Sadly, no matter how great the Kelly-Moore team, products and reputation for service, we simply couldn’t overcome the massive legal and financial burdens that have been weighing on the company for many years.

Kelly-Moore said that for more than 30 years, it has been dealing with thousands of asbestos litigation claims related to its past use of asbestos in cement and texture products under prior ownership, a practice that was discontinued in 1981.

The company said that neither a bankruptcy reorganization nor an in-court liquidation are viable or advantageous because of its inability to fund its continued operations, as well as the fact that it leases all its facilities and has no unencumbered hard assets that could be made available for distribution to creditors.

Last week, Kelly-Moore announced a furlough of roughly 700 employees across its locations, as well as an operational halt at its manufacturing facility in Hurst. The company said at the time that it had a number of interested investors with which it was working, in hopes of allowing for a return to full operations. Kelly-Moore said it had worked seeking new capital to enable a turnaround, with assistance from financial adviser Houlihan Lokey.

No interested investors stepped forward and the company has not secured additional funding needed to continue operations.

The company said that during the wind-down process, it will try to fulfill previously placed customer orders to the extent possible from existing inventory in Kelly-Moore’s Union City, California, distribution facility.

The company said all its other facilities will be closed permanently, including its manufacturing facility in Hurst, which opened in 2017, and its retail stores, all of which were leased. Kelly-Moore said its employees will be compensated fully for regular time worked, and management will continue its efforts to collect receivables to pay all accrued benefits including paid time off.

“I could not be prouder of what our talented team accomplished under extremely challenging circumstances,” Gassenheimer said. “My deepest sympathy goes out to our loyal employees, customers, industry partners and the communities where we do business, who have supported Kelly-Moore throughout its long history. Unfortunately, this was the only viable alternative remaining for us after evaluating all other potentially feasible options.”

Gassenheimer said that the closing comes after 2022 acquisition of the company by Pleuger Chemicals.

“Our owners took on significant financial risks in the acquisition last year,” Gassenheimer said. “Unfortunately, despite their extraordinary efforts after acquiring this distressed business, they simply couldn’t overcome the unexpectedly large challenges, and will be exiting the business.”

The cumulative effects of a cash drain caused by legal settlements and the cost of defending ever-continuing case filings, Kelly-Moore said its ability to reinvest in the business – including investments needed to address historical supply chain challenges that were worsened by the COVID-19 pandemic – has been severely constrained for an extended period of time. Kelly-Moore said that despite paying out roughly $600 million over the past 20 years to settle asbestos claims, a recent study it commissioned estimates future asbestos liabilities exceed $170 million.

The company also has been impacted by what it called “insurmountable legal liabilities” inherited by the current ownership group from its 2022 acquisition, including millions of dollars of previously unpaid sales and use taxes. Kelly-Moore said it is pursuing its legal rights regarding these claims.

After acquiring Kelly-Moore in October 2022, Pleuger Chemicals appointed Gassenheimer to evaluate and implement strategies for improving a dire financial position by enhancing Kelly-Moore’s reach and market share. These strategies included starting the process of relocating the company’s headquarters from California to Texas, exploring new supply-chain partnerships domestically and abroad, planning strategic technology and store upgrades, and resolving a sizeable portion of the pending asbestos claims, the company said.

Kelly-Moore said it also engaged and worked with outside professional advisers to assess and improve its liquidity position, exploring various options for new funding sources or partnerships to avert a wind-down. An exhaustive process was conducted that included pursuing opportunities for new capital investment, a potential sale, merger, or reorganization, Kelly-Moore said.

The company said it was impossible to attract any additional funding or interest to recapitalize, restructure or reorganize the business, largely because of the asbestos litigation.

Kelly-Moore Paints was founded in 1946 in San Carlos, California by William Kelly and William Moore. 

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