$43M Photocircuits deal expected

A federal bankruptcy court judge is expected to give conditional approval for an investment firm to purchase Photocircuits Corp. in a deal valued at around $43 million.

The deal, which could be closed March 3, would give Photocircuits much-needed operating capital and a guarantee that its 940 employees would have jobs for at least a year, representatives said in court yesterday.

Photocircuits, the Glen Cove maker of printed circuit boards that filed for bankruptcy protection in October, would be bought by American Pacific Financial Corp., a San Bernardino, Calif., investment firm with numerous distressed-company holdings.

Several last-minute factors, including reports that Photocircuits had significantly revised downward its sales and earnings projections for 2006 earlier this month, nearly threw a wrench into proceedings, leading bankruptcy Judge Stan Bernstein to demand more time before signing off.

The downward sales trend also meant that the field of potential bidders for Photocircuits was narrowed from an expected three to just one - American Pacific - at the Central Islip courthouse yesterday.

Bernstein, attempting to maintain order as more than a dozen lawyers for various interests fluttered in and out of his courtroom, spent considerable time seeking testimony to make certain American Pacific wasn't buying the company for a quick liquidation.

On the witness stand, Larry Polhill, president and chief executive of American Pacific, said he intended to maintain Glen Cove operations and work with the state to apply for grants to bolster his investment.

American Pacific is paying $32 million in cash and $5.5 million in notes and is assuming around $6 million in debt.

In a last-minute change based on the lower sales forecast, American Pacific won't share in the proceeds of the sale of a company production facility in the Philippines that was never opened.

Other factors that could still alter or, in the worst case, unravel a sale include an outstanding debt to the Long Island Power Authority and back tax payments to the City of Glen Cove.

"LIPA clearly is a problem, because it's a contingency," said chief financial officer Jim Zerby.

But Photocircuits' bankruptcy lawyer, Gerald Luckman, was optimistic about resolving it. "I don't see anything getting in the way," he said.