The company involved in employing warehouse workers and others involved in liquidating Liberated Brands won’t see repayment for its work much like the other creditors in the surf and skate licensee’s now tossed bankruptcy case.
The short end of the stick for unsecured creditors, those last in line to be repaid in a bankruptcy, is nothing new. Although, the weeds of who gets cut a check and who doesn’t is mostly missed in media coverage of bankruptcies.
Still, in the case of Liberated Brands – the former licensee of RVCA, Roxy, Quiksilver, Billabong, DC Shoes and other Authentic Brands-owned labels – reorganization was the hope for the business, not all-out liquidation.
That was a fine point made by CorTech LLC, which does business as JobsRUs.com, in pushing back in a May court filing on having a judge dismiss Liberated’s case.
The family-run company provided warehouse employees to Liberated as it was liquidating its inventory. That was “critical” work “for the benefit of” Liberated’s lenders, executives and professional service firms, attorneys for the company argued. CorTech paid those employees on behalf of Liberated, the company said in its objection.
The company said nearly $360,000 is now past due on invoices totaling over $576,000.
Transparency of Risk
While Liberated highlighted the going-out-of-business sales and other actions to monetize what it could in its request to have its bankruptcy dismissed, the company said nothing about the workers used to facilitate that revenue generation – specifically for Volcom – CorTech said. Thus, the significance was never flagged to the court so that CorTech could be compensated for the salaries and benefits paid to those employees.
Attorneys for CorTech also said that at no time did Liberated waive “the specter” of a complete business wind down or its likely inability to pay.
“The warehouse services provided by the employees, resulted in the liquidation of collateral which enabled lenders to achieve a significant recovery and for [Liberated’s] professionals to be compensated,” CorTech said.
Liberated shrugged off the accusations in its response.
Instead, the RVCA and Quiksilver licensee’s attorneys raised statements made in a March hearing during which the bankruptcy was called “an exceedingly difficult case” and the committee representing the unsecured creditors was “very worried about administrative solvency.”
“No other option for the conclusion of the [company’s] Chapter 11 cases will provide a greater recovery for [CorTech] or any other party in interest and [CorTech] fails to show or even state that any other option would provide a greater recovery,” Liberated attorneys said in a response.
That’s a tough pill to swallow when one looks at last week’s filing requesting a judge approve fees for the attorneys and consulting firms involved in the bankruptcy. A detailed look at what these firms requested in compensation and repayment for expenses, can be found here.
Be First to Comment