UPG Enterprises - Chapter 11 Case Summary
UPG Enterprises filed for Chapter 11 after a series of 2024 setbacks: the termination of a major automotive contract that caused more than $15 million in losses, the loss of much of its sales infrastructure, and its prior lender's decision to end the relationship. Despite nearly $60 million in support from its owners, liquidity kept tightening. The company plans a section 363 sale of substantially all of its assets and an orderly wind-down, funded by debtor-in-possession financing from Firehorse Capital, an affiliate of its owners.
Business Description
UPG Enterprises, LLC ("UPG") is a holding company headquartered in Oak Brook, Illinois that oversees a diversified portfolio of industrial businesses acquired over the years. UPG, together with its affiliated debtors and debtors in possession (collectively, the "Debtors," and together with UPG's direct and indirect Debtor and non-Debtor subsidiaries, "UPG & Subsidiaries"), comprises a diverse set of industrial companies focused on steel processing and production, manufacturing, distribution, and logistics, operating under brands that include Lexington Steel, Douglass Logistics, Maksteel, and Metalex. Across all of their groups, the Debtors employ approximately 282 individuals. The Debtors filed for Chapter 11 on September 22 and 23, 2026 (the "Petition Date").
The businesses are divided into groups overseen by a group of holding companies (the "Corporate Group"), with UPG and Debtor UP Investment Holdings LLC ("UPI") at the top: a flat roll group that processes carbon steel into flat sheets or coils (the "Flat Roll Group") and a fabrication group that manufactures finished steel components (the "Fabrication Group," and together with the Flat Roll Group, the "Operating Groups"). An affiliated electrical group that manufactures electrical steel laminations (the "Electrical Group" or the "Non-Debtor Operating Group") is not among the Debtors and is not part of these Chapter 11 cases at this time.
Corporate History
The Debtors trace their beginnings to 1968 and a family-run flat-rolled steel distributor based in Bedford Park, Illinois called Lexington Steel, which specialized in flat-rolled steel processing and distribution and offered slitting, cut-to-length, toll processing, logistics, packaging, shipping, and warehousing. In 2020, Lexington Steel was indirectly acquired by UPG, f/k/a Union Partners I LLC, which was founded by Paul Douglass and Christopher Hutter (the "Owners").
UPG at times offered management and shared services and now functions as a holding company that conducts the steel manufacturing and processing business alongside its affiliate UPI, a holding company that indirectly owns all, or a majority, of the equity in most of the entities in the Operating Groups. The exception is Debtor Sidecar NM LLC, which is directly owned by the Owners and managed by UPI.
Operations Overview
The Corporate Group consists of holding companies with no operations and minimal employees. Certain of the Corporate Group Debtors are used as leasing vehicles for both the equipment and the leased premises utilized in the Operating Groups' business operations.
Flat Roll Group
The Flat Roll Group Debtors run both toll processing and direct sales businesses specializing in coil processing of hot-rolled, cold-rolled, galvanized, stainless, and painted flat-rolled carbon steel, with capabilities that include tension leveling of high-strength and stainless grade steel, multi-blanking, and strain extension. Toll processors use specialized equipment, facilities, and technical expertise to turn customer-supplied raw materials into finished or semi-finished products for a fee, while the customer retains ownership of the materials. Three Debtors comprise the group's operations: Chicago Steel Holdings LLC, Lexington Steel LLC, and Maksteel USA LLC.
Lexington Steel LLC and Chicago Steel Holdings LLC operate out of a 250,000 square-foot leased facility in Gary, Indiana, where Lexington Steel LLC runs a direct sales business and Chicago Steel Holdings LLC primarily operates as a toll processing brand. The dual structure allows Chicago Steel Holdings LLC to process steel for several of Lexington Steel LLC's direct-sale competitors. Their largest end markets are racking and store displays and stamping.
Maksteel USA LLC operates as a flat-rolled steel service center out of an 80,000 square foot facility in Wyoming, Michigan, leased after a sale-leaseback, with its business anchored by a multi-blanking line. End markets for the steel it processes include appliance and automotive applications.
Beyond steel processing, the Flat Roll Group provides in-house logistics through temperature-controlled storage space for finished products and the trucking capabilities of Debtor Douglass Logistics LLC, supplemented by partnerships with third-party trucking companies and rail services.
Fabrication Group
The Fabrication Group is a steel processing and fabrication platform operating through Debtors National Metalwares, L.P. and Metalex, LLC at facilities in Aurora and Libertyville, Illinois. It manufactures and fabricates value-added metal products and tubular components, including perforated and expanded metal, safety grating, rail components, welded steel tubing, and fabricated tubular assemblies.
National Metalwares, L.P., at the Aurora facility, is a vertically integrated manufacturer, fabricator, and finisher of welded steel tubing and tubular components, producing mechanical steel tubing from flat rolled steel using three in-house tube mills. The majority of that tubing becomes a value-added OEM part, and end products are used by lawn and garden, furniture, education, and transportation OEMs.
Metalex, LLC, at the Libertyville facility, manufactures expanded metal, perforated metal, safety grating, and rail products and primarily serves filtration and rail OEMs, with about 60% of its business coming from filtration products and 25% from rail and safety grating products.
Electrical Group (Non-Debtor)
The Electrical Group processes and fabricates electrical-grade steel and non-oriented laminations, with capabilities including coil slitting and blanking, stamping, lamination, assembly, and finishing of electrical steel components. It operates through four operating entities, Mapes & Sprowl Steel LLC, UPG Electrical LLC, Cortran LLC, and Carter Motor Company LLC, across two facilities in Elk Grove Village, Illinois and Monroe, Wisconsin.
Historical Revenue by Division
| Division (US$ in thousands) | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Corporate Group | $40,680 | $55,210 | $39,842 | $28,214 | $2,086 |
| Flat Roll Group (US) | $365,888 | $365,568 | $375,126 | $202,231 | $81,555 |
| Fabrication Group | $87,116 | $98,954 | $72,451 | $66,677 | $64,321 |
| Total (excl. Canada) | $493,684 | $519,733 | $487,420 | $297,122 | $147,962 |
Prepetition Obligations
On a consolidated basis, the Debtors estimate book-value assets in excess of $75 million and liabilities in excess of $100 million. Their primary funded debt sat in two facilities, each mapping generally to one of the Operating Groups, supplemented by a subordinated secured bridge facility funded by the Owners.
| Facility | Obligors | Size | Maturity | Outstanding at Petition Date |
|---|---|---|---|---|
| White Oak Facility (Dec. 31, 2024) — White Oak Commercial Finance, LLC, administrative agent | Borrowers: Maksteel USA LLC, Chicago Steel Holdings LLC, Lexington Steel LLC, non-Debtor Maksteel Holdings LLC. Guarantors: UPG Flat Roll Group LLC, non-Debtor Maksteel Holding Corp. | Up to $90,000,000, borrowing-base limited | Dec. 31, 2028 | ~$50,424,614.73 principal and interest, plus other "Obligations" |
| Wintrust Facility (Aug. 22, 2022) — Schaumburg Bank & Trust Company, N.A., administrative agent | Borrowers: Metalex, LLC; National Metalwares, L.P.; UPG Fabrication LLC; National Metalwares Holdings LLC; Sidecar NM LLC | Term loan $4,274,650; revolving loan up to $35,000,000, borrowing-base limited | Term loan Aug. 22, 2027; revolver Mar. 31, 2026 | ~$7,520,357.86 principal and interest, plus other "Obligations" |
| Prepetition Bridge Facility (Fourth Amended and Restated Promissory Note, Sept. 17, 2026) — Firehorse Capital, LLC | All Debtors and certain non-Debtor affiliates | $4,984,214.59 | — | — |
White Oak Facility — Flat Roll Group
The borrowers and guarantors under the White Oak Facility (together, the "White Oak Loan Parties") were permitted to borrow against their eligible accounts, eligible inventory, and eligible fixed assets, less certain deductions defined in the facility. As of the Petition Date, White Oak Commercial Finance, LLC, as administrative agent, holds what the Debtors describe as valid, perfected, first-priority liens in the White Oak Loan Parties' assets other than excluded property, against approximately $50.4 million of principal and interest outstanding plus other obligations under the loan documents. That balance includes amounts attributable to non-Debtor Maksteel Holdings LLC on account of the operations of its Canadian subsidiary, Maksteel Holdings ULC.
Wintrust Facility — Fabrication Group
The lenders under the Wintrust Facility (the "Wintrust Lenders") provided its borrowers (the "Wintrust Borrowers") with two sources of funding: a $4.3 million term loan and a revolving loan of up to $35 million drawn against eligible accounts, eligible warehouse inventory, and eligible in-transit inventory, less certain deductions. The revolving loan was to be repaid by March 31, 2026. As of the Petition Date, Schaumburg Bank & Trust Company, N.A., as administrative agent, and the Wintrust Lenders held what the Debtors describe as valid, perfected, first-priority liens in the Wintrust Borrowers' personal property, with approximately $7.5 million of principal and interest outstanding plus other obligations under the loan documents. The White Oak Facility and the Wintrust Facility are together the "Prepetition Facilities," and their lenders the "Prepetition Lenders."
Prepetition Bridge Facility
Citing the Debtors' recent lack of liquidity, the Owners, through Firehorse Capital, LLC ("Firehorse"), provided subordinated secured prepetition loans to fund an independent governance process and professional restructuring expertise to enable the Debtors to prepare for and commence this Chapter 11 filing (the "Prepetition Bridge Facility"). All of the Debtors and certain non-Debtor affiliates are obligors. The loans are secured by all of the assets of the Debtors but, pursuant to an Intercreditor and Subordination Agreement, are subordinated to the liens and obligations owed to the Prepetition Lenders under the Prepetition Facilities.
Firehorse also made a bridge loan to the Non-Debtor Operating Group under an Emergency Credit Agreement dated January 28, 2026 in the original principal amount of $3,915,000, likewise subordinate to that group's lenders. The Non-Debtor Operating Group had entered into a revolving credit, security and guarantee agreement with FGI Worldwide LLC as administrative agent and lender (the "FGI Lender"), which is not counted among the Prepetition Lenders.
Trade, Priority and Litigation Claims
Funding and cash-flow issues left the Debtors delayed in paying trade and other creditors on a timely basis. As of the Petition Date, the Debtors owed approximately $530,000 in priority claims, mostly taxes owed to governmental entities, and approximately $11 million on account of trade and other unsecured debt. The Debtors prefunded their employees' payroll, leaving technically no outstanding wages owed to employees or payroll taxes due to governmental entities as of the Petition Date.
Over 20 pending litigation matters involve various Debtors, stemming from unpaid amounts under equipment and vehicle leases, unpaid amounts under real property leases, personal injury claims, and unpaid vendor invoices. Total amounts claimed in that litigation exceed $30 million, which may include some overlap with the trade claims described above. Certain of the litigation also includes claims against the Owners, either directly or through alter ego claims, for purported conduct when acting on behalf of the Debtors.
In early 2026, UPG received a Civil Investigative Demand from the United States Department of Justice relating to eighteen Payroll Protection Program loans, nine in each round, taken out during the COVID-19 pandemic by various Debtors, the Non-Debtor Operating Group, and former affiliates, and subsequently forgiven. The total amount forgiven across the eighteen loans is approximately $26 million.
Events Leading to Bankruptcy
Integration Initiatives and the 2021 Consulting Engagement
Following the 2020 acquisition of Lexington Steel, the Debtors undertook a number of initiatives to better integrate their various subsidiaries to reduce costs and increase revenues. In 2021 they engaged a management consulting firm to implement controls, processes, and procedures at the various operating companies, at a total cost in excess of $14 million. The first day declaration of Chief Restructuring Officer John Sordillo (the "Declaration") states that the engagement to streamline the companies' infrastructure did not have the intended benefits.
The 2024 Setbacks
The Declaration describes 2022 and 2023 as mostly profitable years for the Debtors' businesses, followed by a series of significant setbacks in 2024:
A significant contract between the Flat Roll Group and a large automotive manufacturer in Chattanooga turned negative due to various internal and external factors, and efforts to renegotiate the contract to enable a return to profitability were unsuccessful. Termination of the contract resulted in losses exceeding $15 million to UPG & Subsidiaries.
The Debtors lost a significant portion of their sales infrastructure due to changes implemented by executive leadership hired the prior year, a loss the Declaration ties to further erosion in sales across all of their operating groups.
The Debtors' prior lender, which had banked with UPG since 2015, sought to end its relationship with the Debtors. That forced a refinancing of loans across the businesses and placed one of the operating groups, the structural steel group that is no longer with the Debtors, into receivership.
The Liquidity Squeeze
To address the resulting liquidity challenges, the Owners have directly or indirectly put nearly $60 million into the Debtors and the Non-Debtor Operating Group since 2024 to maintain operations, preserve jobs, and facilitate restructuring efforts. Despite that support, the Declaration states, the Debtors' ability to operate at or even near capacity and to utilize vendors and suppliers diminished in a vicious cycle. More recently the Prepetition Lenders constrained borrowing and implemented borrowing base reserves, changes the Declaration says exacerbated the liquidity position. Many key suppliers of material necessary for operations moved to cash in advance or placed the Debtors on hold until amounts owed are satisfied, leaving the Debtors reviewing accounts payable daily to determine which vendors and suppliers must be paid to continue operating, on top of their struggle to make payroll.
Forbearances and the Independent Governance Process
Beginning in November 2025, the Debtors entered into a series of forbearance agreements regarding the Wintrust Facility and the White Oak Facility that permitted continued borrowings under each. Those continued borrowings did not provide sufficient liquidity to fund non-operating expenses. On June 24, 2026, the Owners and Managers of UPG and UPI appointed Thomas J. Allison as an independent manager (the "Independent Manager") and the sole member of a special committee (the "Special Committee") of both of those Debtors, and prior to the Petition Date the Owners delegated all fiduciary oversight and governance of the Debtors to the Independent Manager to implement a restructuring including the commencement of Chapter 11 cases.
The Special Committee holds the full powers and responsibilities of the members and managers of UPG and UPI, including authority to:
review and analyze strategic and restructuring alternatives, including a Chapter 11 process for UPG, UPI, and their subsidiaries;
negotiate and consummate sales or other dispositions of assets, property, or interests, including sales to third parties, transactions with the Owners and any of their affiliates, and dispositions under section 363;
negotiate and consummate financings, including debtor-in-possession financings with the Owners and any of their affiliates;
investigate, negotiate, settle, or otherwise liquidate claims asserted or that could be asserted against UPG, UPI, and their subsidiaries; and
investigate, negotiate, commence, settle, or otherwise assert claims against third parties, including the investigation of claims, if any, with respect to the Owners and any of their affiliates.
In June 2026, the Independent Manager appointed John Sordillo as Chief Restructuring Officer of UPG & Subsidiaries, with authority to explore strategic alternatives with the assistance of GlassRatner Advisory & Capital Group LLC ("GlassRatner"), where he is a Senior Managing Director. At approximately the same time, the Debtors engaged Morris, Nichols, Arsht & Tunnell LLP ("Morris Nichols") as bankruptcy counsel and SC&H Capital ("SC&H") as investment banker; Vedder Price, P.C. is also proposed counsel to the Debtors alongside Morris Nichols.
Prepetition Marketing
SC&H commenced outreach to potential buyers in July 2026, contacting approximately 267 buyers, of which 86 executed confidentiality agreements and received access to a confidential information memorandum containing a detailed overview of the Debtors' business operations, assets, commercial arrangements, and historical financial results. After diligence, 10 interested parties submitted letters of interest. The letters representing the highest value for the Debtors' assets required that the Debtors consummate a sale through a Chapter 11 sale process in order to realize the values stated, and the Debtors began negotiating with those parties to develop the terms of an agreement to serve as a stalking horse.
The Debtors also marketed the Electrical Group prior to the Petition Date. After extensive marketing located only a single buyer for one of the facilities the Electrical Group operates, the Debtors acquiesced to that buyer's desire for an out-of-court transaction via an Article 9 foreclosure sale by the FGI Lender. That foreclosure sale is anticipated to occur soon and is the reason the Non-Debtor Operating Group is not part of these Chapter 11 cases at this time; should those companies not continue to pursue the Article 9 foreclosure sale, UPG and UPI reserve the right to file voluntary petitions for some or all of the Electrical Group.
Chapter 11 Filing
Each of the Debtors filed a voluntary petition on the Petition Date in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division, seeking joint administration. The Debtors filed to pursue a value-maximizing sale transaction and complete an orderly winddown.
DIP Financing and Cash Collateral
The Debtors have obtained debtor-in-possession commitments from Firehorse, an affiliate of the Owners and the provider of the Prepetition Bridge Facility, the proceeds of which would fund the Debtors' operating expenses and expenses related to the Chapter 11 cases. The financing motion seeks authority to obtain secured priming postpetition financing, to grant liens and superpriority administrative expense claims, to use cash collateral, to grant adequate protection, and to modify the automatic stay, together with the scheduling of a final hearing. The Declaration states that the Debtors negotiated at arms' length with Firehorse to reach agreement on the facility and that they have a critical need for the DIP proceeds and cash collateral to operate their business, preserve going-concern value, and satisfy ordinary-course obligations to vendors and employees.
Sale Process
The Debtors have filed or will file substantially contemporaneously a motion to approve bid procedures for a sale process under section 363, contemplating a supplemental postpetition marketing process and a sale of substantially all of the Debtors' assets, which the Debtors describe as the best way to maximize value for all stakeholders. No stalking horse has been officially appointed. The Debtors, with their advisors and investment banker, have commenced compiling a list of prospective purchasers that will continue to evolve throughout the cases, and SC&H is preparing and distributing marketing materials and additional due diligence materials and establishing an electronic data room for buyers to perform diligence and assess a potential sale.
Other First Day Relief
Claims agent — Retention of Epiq Corporate Restructuring, LLC as claims and noticing agent, effective nunc pro tunc to the Petition Date.
Cash management — Authority to continue the existing cash management system, honor certain prepetition obligations related to it, maintain bank accounts and existing business forms, implement changes to the system as necessary, and extend the time to comply with section 345(b) and the U.S. Trustee's operating guidelines.
Employee obligations — Authority to pay certain prepetition employee obligations and maintain employee benefits programs.
Utilities — Relief prohibiting utility providers from altering, refusing, or discontinuing service, approving proposed adequate assurance of payment with authority to provide additional assurance, and establishing procedures to resolve requests for additional assurance.
Personally identifiable information — Authority to seal certain personally identifiable information for individuals.
The Declaration states that, mindful of the level of cash on hand and the limitations imposed by the DIP budget, the Debtors narrowed the relief requested at the outset of the cases to only those matters requiring urgent relief to preserve value.