The Merit Group, Inc (“Merit”) and 6 associated debtors (the “Debtors” ) filed voluntary petitions under Chapter 11 of the Bankruptcy Code on May 17, 2011 in the Bankruptcy Court for the District of South Carolina (Case No. 11-03216). This initial note provides a brief background of the Debtors based upon information in their first day motions and provides the Debtors’ consolidated list of their 30 largest unsecured creditors.
The Debtors
The Debtors are: The Merit Group, Inc., f/k/a Lancaster Distributing Company, f/k/a Lancaster Paint Sundries, Inc.; Merit Transportation, Inc.; Merit Paint Sundries, LLC d/b/a Lancaster; Merit Supply Company, LLC d/b/a Merit Supply; Merit Pro Finishing Tools, LLC d/b/a Merit Trade Source; Five Star Products, Inc.; and Five Star Group, Inc., d/b/a Lancaster/Five Star, d/b/a Rightway.
The Debtors are leading paint sundries distributors in the United States with annual revenue in 2010 of approximately $200 million. The Debtors’ customer base consists of more than 10,000 independent, regional and national paint store chains as well as “big box” retailers, hardware stores, lumber yards, home centers, drywall yards and auto trim shop distributors. They also serve markets in Mexico, the Caribbean Islands, Central America and South America. The Debtors maintain distribution centers in South Carolina, Florida, Kentucky, New Jersey, New York, Texas, California and Utah.
Secured Loans
The Debtors’ primary secured lending relationship is with Regions Bank, who is owed $51,200,000 (the “Regions Debt”). The Regions Debt is secured by a first priority lien and security interest in all of the Debtors’ real and personal property, including inventory and accounts receivable, including the assets acquired in 2010 in the Five Star Acquisition.
The Debtors obtained additional financing to assist in its stock purchase acquisition of Five Star Products Inc., and its subsidiary, Five Star Group, Inc. and other capital needs. Stonehenge Opportunity Fund, II, L.P. loaned the Debtors $11,956,565 secured by second priority lien and security interest in all of the Debtors real and personal property, including inventory and accounts.
Trade Debt and Trade Creditors
As is typical of major distributors, the Debtors’ have a large trade creditor base. Debtors’ inventory is supplied by over 750 manufacturers. In addition to these inventory suppliers, each of the Debtors’ distribution centers will be supported by a network of vendors and service providers. In total, the Debtors have approximately 1,160 creditors excluding its current and former employees and approximately $100 million of total debt of which $37 million is unsecured trade debt. The Debtors estimate that they may have received as much as $7 million dollars in the aggregate’ of goods from vendors within the forty-five (45) days prior to the Petition Date.
The Debtors' Consolidated List of Holders of Largest Unsecured Claims
The Debtors' have requested authority to file a consolidated list of the holders of the Debtors' largest unsecured claims in lieu of a separate list for each of the Debtors. The consolidated list is set forth below.
| Listed | Creditor Name | Nature of Claim | Status | Amount |
|---|---|---|---|---|
| 01 | Rust Oleum Corporation P.O. Box 931946 Cleveland, OH 44193 | Trade | Unliquidated | $3,224,914 |
| 02 | DAP
National City Bank P.O. Box 951252 Cleveland, OH 44193 | Trade | Unliquidated | $2,289,759 |
| 03 | MINWAX
P.O. Box 198042 Atlanta, GA 30384 | Trade | Unliquidated | $1,874,837 |
| 04 | Wooster
604 Madison Avenue P.O. Box 6010 Wooster, OH 44691 | Trade | Unliquidated | $1,378,589 |
| 05 | 3M MST6980(WC) PO Box 200715 Dallas, TX 75320 | Trade | Unliquidated | $1,242,918 |
| 06 | Masterchem Industries
Inc. P.O. Box 932526 Atlanta, GA 31193 | Trade | Unliquidated | $1,207,636 |
| 07 | Duckback Acquisition
Corp. DEPT. 33533 P.O. Box 39000 San Francisco, CA 94139 | Trade | Unliquidated | $1,181,485 |
| 08 | Tianjin Jinmao Group Co Ltd Wangzhuang Industrial Park Beichen District Tianjin Tianjin, CN 300400 | Trade | Unliquidated | $887,821 |
| 09 | Packing Service Co. P. 0. Box 671530 Dallas, TX 75267 | Trade | Unliquidated | $783,177 |
| 10 | Old Masters 303 19th Street SE P.O. Box 286 Orange City, IA 51041 | Trade | Unliquidated | $729,211 |
| 11 | Craig Fletcher 1 Lost Valley Court Heath, TX 75032 | Other | Unliquidated | $700,000 |
| 12 | Dennis Fletcher 28822 Saddle Oak Montgomery, TX 77356 | Other | Unliquidated | $700,000 |
| 13 | Richard Sauve 243 Riddell Lane Alameda, CA 94502 | Other | Unliquidated | $600,000 |
| 14 | Primrose Plastics PO Box 32174 Hartford, CT 06150 | Trade | Unliquidated | $526,077 |
| 15 | WM BARR. DEPT 1855 PO Box 2153 Birmingham, AL 35287 | Trade | Unliquidated | $496,465 |
| 16 | Penofm Performance Coating Inc. P.O. Box 1569 Ukaih, CA 95482 | Trade | Unliquidated | $493,899 |
| 17 | Intertape Polymer Corp. PO Box 67000 Detroit, MI 48267 | Trade | Unliquidated | $450,697 |
| 18 | Purdy Corporation P.O. Box 403593 Atlanta, GA 30384 | Trade | Unliquidated | $427,756 |
| 19 | Modern Masters P.O. Box 92245 Cleveland, OH 44193 | Trade | Unliquidated | $420,032 |
| 20 | Ace Oldfields J1. Raya Cileungsi Jonggol KM 22.5 Cileungsi Bogor West, WJ 16100 | Trade | Unliquidated | $414,555 |
| 21 | Sashco 10300 E. 107th Place Brighton, CO 80601 | Trade | Unliquidated | $413,363 |
| 22 | Unigroup Worldwide 22524 Network Place Chicago, IL 60673 | Trade | Unliquidated | $390,694 |
| 23 | Henkel Corp Consumer Adhesives 15805 Collections Center Drive Chicago, IL 60693 | Trade | Unliquidated | $377,982 |
| 24 | Homax Dept. 2070 Denver, CO 80291 | Trade | Unliquidated | $332,997 |
| 25 | Milazzo Industries 1609 River Road Pittston, PA 18640 | Trade | Unliquidated | $331,355 |
| 26 | Val-Test Sundries 2400 Hassell Road, Suite 370 Hoffman Estates, IL 60169 | Trade | Unliquidated | $323,373 |
| 27 | Shurtape P.O. Box 100322 Atlanta, GA 30384 | Trade | Unliquidated | $317,430 |
| 28 | Shur-Line Inc. 75 Remittance Drive Suite 1167 Chicago, IL 60675 | Trade | Unliquidated | $305,615 |
| 29 | Lenox 75 Remittance Drive Suite 1167 Chicago, IL 60675 | Trade | Unliquidated | $293,810 |
| 30 | Gaco Western Inc. P.O. Box 9827 Seattle, WA 98109 | Trade | Unliquidated | $281,823 |
The list does not include: (1) persons who come within the definition of “insider”; or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.
Bankruptcy Rule 1007(d) provides that a debtor shall file “a list containing the name, address and claim of the creditors that hold the 20 largest unsecured claims, excluding insiders.” Fed. R. Bankr. P. 1007(d). In the case of a multi-debtor filing, it is likely that many creditors are shared among certain of the debtors. This is especially the case where the debtors operate as a single business enterprise. Under these circumstances and provided that there is a request for joint administration, it is common for multiple, related debtors to request authority to file a single, consolidated list of their collective largest general unsecured creditors. These requests usually are granted by the bankruptcy court.
The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.