Color Spot in Chapter 11 bankruptcy, has plans for going-concern sale

By Caroline Salls

Pittsburgh, May 30 – Color Spot Holdings, Inc. filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Chief executive officer Paul W. Russo said in a statement filed with the court that about $83 million of funded debt will be due with the maturity of a Wells Fargo credit agreement “that is only days away.”

“The debtors believe that they have a viable business, but their current capital structure is unsustainable – particularly with $83 million due to Wells on June 1,” Russo said.

As a result, Russo said Color Spot intends to sell its business as a going concern through a court-supervised sale process.

“The alternatives to a going-concern sale that are available to the debtors at this time would produce a sub-optimal outcome,” Russo said.

The CEO said the company will ask the court to establish a July 16 bid deadline, schedule an auction to be held on July 18, if necessary, and approve a sale that would close on July 31.

In connection with the bankruptcy filing, the company is seeking court approval to use the cash collateral of its pre-bankruptcy secured parties to fund its operations while in Chapter 11.

Entities with an interest in the cash collateral include Wells Fargo Bank, NA, Capital Farm Credit, FLCA and Black Diamond Commercial Finance, LLC.

According to court documents, Color Spot has up to $50,000 in assets and $50 million to $100 million in debt.

The company’s largest unsecured creditors are Express Seed Co. of Oberlin, Ohio, with a $2.48 million trade claim; Ball Horticultural Co. of West Chicago, Ill., with a $1.17 million trade claim; Nursery Supplies Inc. of Chambersburg, Pa., with a $1.05 million trade claim; and Summit Plastics of Chambersburg, Pa., with a $1.05 million trade claim.

Young Conaway Stargatt & Taylor, LLP is representing Color Spot in the Chapter 11 proceedings.

Color Spot is a Temecula, Calif.-based flower grower and distributor. The Chapter 11 case number is 18-11272.

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