As the Celadon Bankruptcy Case Ends, a Multitude of Creditors are Left High and Dry
The Indianapolis-based Celadon Group Inc. has run out of gas trying to liquidate its assets. The bankruptcy proceedings of the trucking company have ended, and many of its creditors are now left without a paycheck.
After a long period of financial difficulties, Celadon and its subsidiaries filed for bankruptcy protection in December 2019. The company declared $427 million in assets and $391 million in liabilities. Celadon began to sell its Indianapolis real estate and its fleet of trucks and other assets to help pay its debts.
Celadon has now raised $75 million, which is $45 million less than the $120 million required to repay a loan from its secured creditors. These include New York lenders Blue Torch Finance LLC, Luminus Energy Partners Master Fund Ltd.
Secured creditors are the first to be paid in the bankruptcy. Unsecured creditors may end up getting only a fraction.
Because Celadon could not cover its secured debts even with its collateral, its creditors will not see any.
Jay Indyke, an attorney representing unsecured creditors in the Celadon matter and a partner at Cooley LLP’s New York City office, stated that “In this case unfortunately, it will be zero.”
A federal bankruptcy judge approved last week a settlement agreement between Celadon, its secured creditors, and Indyke’s committee of unsecured creditors.
The case was closed and dismissed on March 31.
Celadon will also be transferring its remaining assets to Luminus as part of the settlement. This includes a parcel in Gadsden (Alabama), Celadon’s remaining trucks, various accounts receivable, and a few other assets.
These assets are “significantly less than” the $45 million Celadon owes its secured creditors. A, Wilmington attorney representing Celadon in bankruptcy, Stuart Brown, stated that the remaining assets are worth “significantly lower”.
A fund has been established to pay the approximately $12 million in fees and expenses that financial advisors, attorneys, and other professionals requested for their work.
Brown refused to disclose how the 75 million dollars in liquidation proceeds would be divided among Celadon’s secured creditors. He said that this information is confidential.
Celadon raised just above $20 million by selling the two remaining divisions after the rest of its company was shut down.
Celadon’s North Carolina subsidiary Taylor Express was sold to White Willow Holdings LLC for $14.5 million in February 2020. This Luminus affiliate is also known as White Willow Holdings LLC. Celadon also sold its Mexico-based business to Jaguar Transportation Inc. in June for $6.1million.
The sale of Celadon’s former corporate campus at 9503 E. 33rd St. for $3 million and its former driver training academy at 9050 E. 33rd St. for $2.8million were other significant transactions. IndyGo bought both parcels but later sold the former training academy to the city to use the fire department.
Celadon claimed that it raised almost $20 million through the sale of its trucks. However, these trucks were scattered across the United States, Canada, and Mexico when the company filed for bankruptcy.
Indyke stated that the pandemic harmed the number of liquidation funds the company was able to raise. He cited the example of Celadon, who had made a deal to sell Mexico’s business before the pandemic. The deal was canceled, and the company sold for less when it did sell a few months later.
Jim Carlberg, a bankruptcy expert and an attorney at the Indianapolis office Bose McKinney and Evans LLP, was not involved in the Celadon matter. However, he agreed that liquidation activity was likely to have been dampened by the economic uncertainty created by the pandemic.
Carlberg stated, “I’m sure that would have an impact on what potential bidding parties would have been willing and able to pay for assets.”
Brown, the representative of Celadon, isn’t so sure.
He said that it’s difficult to determine if Taylor Express and its Mexico-based division were affected by the pandemic. However, concerning bankruptcy, real estate liquidation, “our opinion is that we got fair values from it, so [the pandemic] doesn’t matter much.”
The U.S. Department of Justice was Celadon’s largest secured creditor. It submitted a $33 Million claim for the unpaid portion of a $42.2million settlement agreement. Celadon agreed in April 2019 to settle allegations that it had committed securities fraud through false financial statements and falsifying records.
In connection with that case, Danny Williams, former president of Quality Cos. subsidiary of Celadon, pleaded guilty to conspiracy to commit securities fraud, make false statements before a public accountant, and falsify books records and accounts of public companies.
Two other ex-executives, Bobby Peavler and Eric Meek, were indicted on multiple counts of fraud and making false representations to public accountants just days after Celadon filed for bankruptcy. Both men pleaded guilty, and their cases are still pending at federal court.
Both the Justice Department and attorneys representing Luminus, Blue Torch, declined to comment.
Celadon’s unsecured creditors achieved one win.
In certain cases, bankruptcy law allows the court to order creditors to return any payments received from the debtor within 90 days of the bankruptcy filing. The money can then be distributed among creditors.
Celadon’s secured creditors opted not to sue unsecured creditors in this instance. Therefore, the unsecured creditors will not be required to repay any money received from Celadon before the bankruptcy filing.
Jay Jaffe, an Indianapolis bankruptcy expert and partner at Faegre Drinker Biddle and Reath LLP, said that “that would have been being pouring salt into the wound.” ”To make it go away, I believe, was a significant advantage to the unsecured creditors.
Jaffe stated that he did some work tangentially related to Celadon’s bankruptcy, but not the main case. He stated that it is not unusual for bankruptcy cases to end in the same way as Celadons. As a result, many creditors are left behind.
“It’s not a happy ending for anybody.”
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