Suncoast files for Chapter 11 bankruptcy relief
Casual Living Staff -- Casual Living, 12/13/2010 9:03:00 AM
FORT MYERS, FL — Suncoast Aluminum Furniture filed a voluntary Chapter 11 bankruptcy relief petition Dec. 3 in U.S. Bankruptcy Court, Florida middle district, Fort Myers division.
Reasons for the shortfall are connected to business debt, primarily to secured creditor Busey Bank.
According to the court filing, Suncoast refinanced certain obligations owed to Bank of America in 2006 by obtaining loans from Busey Bank. Suncoast currently has an asset-based revolving line of credit facility and two mortgage loans with Busey Bank, with a total indebtedness of approximately $7.5 million. As of the petition date, Suncoast owed about $3.2 million to Busey Bank on real estate loans, and approximately $4.24 million on its line of credit.
In addition to those secured debts, the unsecured claims against Suncoast totaled $362,097. The Merchandise Mart in Chicago is Suncoast's largest unsecured creditor with a claim of more than $55,500, according to the filing. Supplier Sapa Extruder, Inc., based in Gainesville, Ga., was the next largest unsecured creditor with a claim of more than $51,600 and Superior Sample Co., in Ligonier, Ind., has a claim of just over $24,000. Debt to Phifer Wire Products and HD Expo 2011 also were among Suncoast's 20 largest unsecured creditors.
Court record show during 2010, Suncoast experienced problems with working capital under the revolver facility with Busey Bank. In an effort to preserve operations and manage temporary operating shortfalls, a previous member of Suncoast's management submitted inaccurate borrowing base reports to Busey Bank.
Immediately upon the current management's discovery of such events, on July 1, Suncoast contacted Busey Bank to disclose the accurate borrowing base numbers, explain and work through the situation on a consensual basis. Suncoast fully consented to and assisted with an audit by an accounting firm of Busey Bank's
Despite the audit and other efforts to work out a consensual resolution, Busey Bank demanded that Suncoast pay down the amount owed beyond what the outdoor furniture manufacturer was in a position to accomplish. No additional draws occurred on the credit line following the discovery of the borrowing base reporting issues, and Suncoast continued to pay the required interest payments on the credit line, interest and principal payments on the two mortgage loans until October 2010. In November 2010, Busey Bank stopped accepting any partial payments, and filed suit for foreclosure, including a request for the appointment of a receiver, forcing Suncoast to seek relief in bankruptcy court.
Before the bankruptcy reorganization filing, Suncoast obtained a non-binding loan commitment from another financial institution to refinance, at a discount, the obligations owed to Busey Bank. But because of the circumstances surrounding the strained relationship with Busey Bank and the filing of the state court
litigations, Suncoast has been unable to close on the refinancing, but remains confident that the prospects for such a facility are strong.
Efforts to reach Suncoast President Paul Varshney were unsuccessful on Monday, Dec. 13. As of the petition date, the company employed 55 people. Suncoast does not owe any amounts for payroll taxes, but does owe the nominal amount of approximately $718 for sales taxes incurred during November 2010.
In February 1983, Varshney and his wife Raj Varshney bought a small, virtually unknown company named Suncoast Aluminum Furniture Manufacturing.
Suncoast started its operations on Feb. 21, 1983, in a 1,500-sq.-ft. rented building in Fort Myers, Fla., with one part-time employee. Beginning with only a few furniture collections and a liquid paint finish process, the
Varshneys built the Suncoast name over the past three decades.
In 1989, a new 16,250-sq.-ft. plant was built and an advanced, conveyorized powder coat finishing line replaced the old liquid paint technique. Several new collections in propriety extrusions were added. In 1990, following his college graduation, Rajiv Varshney joined his parents in the day-to-day operations of Suncoast, thus ensuring continuity of the family's business philosophy. Suncoast's business flourished and in 1992, another 31,250 sq.-ft. expansion took place.
In 1999, a third expansion was completed, adding an additional 29,000 square feet of manufacturing space. Suncoast's fourth expansion of 62,500 square feet was completed in April 2003. With the addition of new offices, a new state-of-the-art finishing line, and a total of 139,000 square feet of operational capacity, Suncoast's manufacturing capabilities have quadrupled its previous capacity. Suncoast has grown steadily and at one time employed more than 100 craftspeople and office personnel, some who have been with the company for 15 years.
Today, Suncoast remains a family owned and operated, customer oriented business. Suncoast has been a leader of design in the casual furniture industry, winning two highly recognized industry awards. In 1997, its Radiance collection garnered the prestigious Design Excellence Award. In 2001, the South Beach collection also won
the Design Excellence Award in the cast and extruded aluminum combination category. Three new groups were added for 2002-2003, giving Suncoast a total of 20 sling, cushion and strap collections.
The Varshney's dedication to quality and hands-on approach to their business has enabled Suncoast to grow. From the initial design to the cutting, bending and finishing of the tables, chairs and accessories, pride and commitment to quality are the hallmark of their business.
The real property assets of Suncoast consist of its manufacturing operations and headquarters facility in Fort Myers, with a tax assessed property value of $3.27 million. The personal property assets consist primarily of accounts receivable, inventory and equipment, furniture and fixtures. As of Nov. 30, the total net book value of those categories was more than $3.5 million.
Motions seeking authorization to use cash collateral, to pay employee wages and benefits, and officers' salaries were expected to be filed by Dec. 17, within two weeks of the petition date.