Trustee wants to sell Duluth tech company's assets to resolve bankruptcyThe court-appointed trustee for the 50 Below bankruptcy case wants to sell the company’s assets in an attempt to pay off its multimillion-dollar debt.
By: Candace Renalls, Duluth News Tribune
The court-appointed trustee for the 50 Below bankruptcy case wants to sell the company’s assets in an attempt to pay off its multimillion-dollar debt.
If successful, the Duluth technology firm would continue to operate under new ownership.
“The goal is to get out of bankruptcy,” said Michael McGrath, the Minneapolis attorney who filed the 50 Below Chapter 11 case. “This is the quickest way out of Chapter 11, which is really important to our employees and customers.”
The company, which is one of Duluth’s largest technology employers, filed bankruptcy on Aug. 29, claiming liabilities of about $12 million to 20 creditors. It included secured debt of nearly $8.9 million to the IRS in unpaid payroll taxes and $1 million to the Minnesota Department of Revenue in taxes.
In a motion filed last week in U.S. Bankruptcy Court, trustee Nauni Jo Manty sought approval for a bid procedure to sell off company assets, including trademarks, divisions, contracts and unexpired leases.
A hearing on the bid request will be held Thursdayin U.S. Bankruptcy Court in Duluth. A hearing on the sale itself is set for Nov. 7. Sealed bids would be due by Oct. 29.
“Piecemeal sale of assets is possible, according to the motion, but they can also bid on everything,” McGrath said. “The hope and expectation is the company will remain a single enterprise and continue to operate.”
50 Below, which has about 250 employees, designs, builds and maintains websites and offers web-based marketing campaigns and sales and hosts retailer websites and e-commerce stores.
Rick Gallagher, a Twin Cities-based financial consultant who has worked with 50 Below, believes that the highest bidders will seek to purchase the entire company.
“So the owners of the company won’t remain in control, but it’s not unusual for the new owners to put the old owners in consulting arrangements,” he said.
Company president Michael Rollo declined comment on the trustees’ move to sell his company’s assets.
But Gallagher said principles Rollo and David Hogge are working with the trustee to ensure a seamless transition.
“They want the company to continue,” Gallagher said. “They know that’s what’s best for the creditors as well as for the employees. That’s what their goal is.”
Proceeds from the sale would go to the creditors, with the government’s
$10 million in secured claims first up for payment. But even if all assets are sold, Gallagher doubts it would be enough to also pay off 50 Below’s unsecured debt, which he says totals $2 million.
“I don’t think this business will sell for $10 million,” he said. “I don’t think there’d be payments to unsecured creditors.”
The proposed sale is one of two ways for a business to get out of Chapter 11. The company had initially pursued the other path — reorganization. That way, the company could set up a structured five-year plan to pay its taxes, McGrath had said.
But the trustee chose a different path.
“In this case, the trustee opted to do sale by motion,” McGrath said. “This is an expedited process and the company can be out of the Chapter 11 process quicker.”
It could be as fast as Nov. 10, he said.
“Getting out quickly is good for everyone,” Gallagher agreed.
The company’s filing for bankruptcy followed years of tax trouble with the IRS and state Department of Revenue that resulted in claims filed against the company in court and tax liens on the company.