ESCO To Be Liquidated Under Chapter 7

Jason Sandefur

The assets of electronic component and fastener distributor ESCO LLC are scheduled to be liquidated following a creditor dispute that forced the company into Chapter 7 bankruptcy. According to court records, ESCO owes more than $14.5 million in secured debt, along with unsecured debt in excess of $7.7 million. Among its unsecured creditors is Palo Alto, CA-based wiring accessories and fastener distributor ICO Rally, which is reportedly owed $187,487.
A court battle between senior creditor Signature Funding III of Sherman Oaks, CA, and junior credit holder Tangent Fund Management II of San Francisco caused the case to be converted from Chapter 11, which assists in reorganization, to Chapter 7 liquidation. A trustee has been appointed to manage ESCO’s affairs.
Signature acquired ESCO’s debt of $7.88 million from Comerica Bank in mid December 2004 and initiated foreclosure proceedings. Signature estimated ESCO’s fair market value “between $3.8 million (in a forced sale scenario) and $6.6 million (in an orderly liquidation scenario).”
However, Tangent manager Alexander Schilling Jr. claims ESCO’s board was entertaining a $10 million offer from Carlton Bates Co. when Signature started foreclosing, court records reveal. Schilling also notes that ESCO presented balance sheets to Comerica on November 17, 2004, that totaled more than $15 million, including $6.5 million in inventory.
By all accounts, the situation has wreaked havoc on ESCOs business. Signature claims that nearly half of ESCO’s suppliers have refused to ship product, while other suppliers have demanded COD or cash-in-advance terms. In recent weeks ESCO has been unable to fill over 50% of customer orders.
To avoid immediate closure, the court trustee was allowed to continue operating the business for a 60-day period while conducting an “orderly liquidation of (ESCO’s) assets.”
Lake Forest, CA-based ESCO is a 40-year-old company with branches in Dallas, Houston, Denver, Phoenix, San Diego, San Jose, CA, Seattle, and Portland, OR. Web: escollc.com �2005 FastenerNews.com