Anchor seeks to cancel Cadbury contract

Anchor Glass Container Corp. is trying to get out of its five-year contract with UK conglomerate Cadbury Schweppes PLC. The Tampa, Florida-based glassmaker sought permission from the bankruptcy court …

Anchor Glass Container Corp. is trying to get out of its five-year contract with UK conglomerate Cadbury Schweppes PLC. The Tampa, Florida-based glassmaker sought permission from the bankruptcy court to cancel the contract on 24 August 2005. Anchor is contracted to supply 16-ounce glass bottles for Snapple and other Cadbury beverages, as well as containers for certain Motts Inc. products, through 2008. Anchor blames the contract for “substantial losses” because the terms do not let it recoup the rising costs of natural gas, electricity and other raw materials. “This contract is so bad for Anchor … we“re better off not having it,” said Rob Soriano, whose law firm, Carlton Fields, represents Anchor in the bankruptcy case. Soriano said Anchor had little choice but to try to void the contract because attempts to renegotiate the contract have been unsuccessful. He said Anchor“s best argument is that Cadbury has few alternative suppliers among which to choose in the US. If Anchor cancels the contract, bankruptcy law allows Cadbury to seek damages, although these would assume a low priority in comparison to other debtors and may not be repaid in full. Anchor is trying to renegotiate contracts with other customers, including main client Anheuser-Busch, which accounted for nearly half of its revenues in 2004. The threat to cancel the Cadbury“s contract could have a serious impact on Salem, New Jersey: Anchor“s plant there, one of eight nationwide, is reportedly the primary supplier for the Cadbury contract and the city“s largest employer, with about 350 workers. According to local newspaper Today“s Sunbeam, Salem City Council approved tax breaks and other incentives on 23 August 2005 to help Anchor keep the factory going. Anchor filed for Chapter 11 bankruptcy protection on 8 August 2005, its third such filing in the last 10 years. The company is seeking to cut its existing debts, renegotiate contracts with customers and suppliers and get USD 125-million in financing in order to return to financial health. However, the recovery will not be easy: in mid-August the company narrowly avoided being cut off by a supplier that provides 65% of its soda ash. Anchor owes the company several million dollars and is up to a year behind on some of the payments. It was reported on 29 August 2005 that the company had to temporarily shut down a tank at its plant at Elmira Height, New York on 25 August 2005 when a soda ash shipment failed to arrive.