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Michigan steel manufacturer files for Chapter 11 bankruptcy

Michigan business owners know that expanding operations can be a good and necessary step to maintain their position in the marketplace and even grow. Conducting an expansion can be a bit of a gamble: The rewards can be big, but an expansion can also be harmful if the timing or execution isn't right. One area business seems to have had this kind of experience.

Lee Steel Corp. is a steel manufacturer that employs 65 people at three Michigan locations, including one in Wayne County. A few weeks ago, the company filed for Chapter 11 bankruptcy. Court records indicate that Lee Steel owes over $50 million to its creditors.

Less than 24 months ago, the steelmaker opened a new, 250,000-square-foot facility in Romulus. The company also had opened a plant to serve manufacturers in West Michigan in recent years. Although it was hoped that this expansion would be a big boon for the company, industry experts said that the timing was problematic. Steel prices have been trending downward recently, and steel production in the United States has declined by 6 percent just since the beginning of the year. Experts blame a reduced demand for steel in Asia for driving down steel prices.

Despite the sluggish market for steel, a number of potential buyers have expressed an interest in Lee Steel's facilities, according to the company's chief restructuring officer. She said she expected to have agreements in place to sell all or parts of the company's assets by the fourth quarter of 2015.

Sometimes even the most experienced of business people can make an investment that doesn't pan out. When this happens, commercial bankruptcy can be an option regardless of whether the owners wish to have a liquidation of assets or a business reorganization.

Source: Crain's Detroit Business, "Novi-based Lee Steel Corp. files Chapter 11 bankruptcy," Dustin Walsh, April 17, 2015

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