Friedman Bag Seeks to Restructure Itself Under Protection of Bankruptcy Court

Friedman Bag Co., which has been making textile bags in Los Angeles since before the Great Depression, is attempting to restructure its operations in federal Bankruptcy Court.

The family-owned company, which has lost more than $1 million on some of its operations in the last year, filed a petition for Chapter 11 bankruptcy protection last week, listing assets of $25.9 million and debts of $14.3 million.

Lawrence Diamant, a Los Angeles bankruptcy attorney who represents the company, declined to say which parts of the company were unprofitable.

Chief Executive Harvey Friedman, son of one of the founders, was traveling Friday and couldn’t be reached for comment. President Jeff Sway didn’t return a phone call.

The company makes burlap and mesh bags for the farming industry, sandbags for the U.S. military, and supplies related to machinery and other equipment. On its Web site Friday, the company was selling “excess equipment,” including labeling presses and a machine that converts burlap material into rolls.

Friedman was founded by three brothers in 1927 and initially collected, sorted and resold burlap bags used on farms. It later expanded its operations to include manufacturing and diversified its product lines. Today, Friedman has 2,200 customers and operates a 200,000-square-foot factory on Commercial Street in the downtown industrial district, a second facility on Ducommun Street and plants in Bakersfield, Oregon and Idaho.

In 1999, the company went through a major recapitalization. More than 30 family shareholders wanted to cash out of Friedman against the wishes of management, which wanted to invest in new plants and equipment.

The dispute was resolved when the company took out a bank loan to buy out the family members and established a line of credit to cover costs of expansion.

The deal marked the first time in four decades that Friedman had to turn to outside sources for financing, the company’s chief executive said at the time.

The company has secured $3.1 million in debtor-in-possession financing to keep operating its business.

Ultimately, Friedman hopes to sell its money-losing operation and emerge from bankruptcy protection stronger and with less debt, Diamant said.