The Ch. 7 bankruptcy petition recently filed by Hoboken Wood Flooring has been dismissed by the U.S. Bankruptcy Court for the District of Delaware.
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The dismissal places Hoboken back where it was before filing a petition for Ch. 7 bankruptcy, and potentially opens the floodgates for litigation by creditors against Hoboken and its subsidiaries, as well as its controlling investor, private equity firm Code Hennessy and Simmons.
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The trustee in the case filed a Motion to Dismiss Nov. 15, and the case was dismissed Nov. 16. John D. McLaughlin Jr., special counsel to Young Conaway Stargatt & Taylor LLP, law firm based in Wilmington, DE, filed the Motion to Dismiss for the trustee. He said this particular case of dismissal was rare, due to the size and complexity of the company.
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Usually a trustee can come up with a deal with the lender to fund the administration of the case, or waits 30 days and files a ‘no distribution report,'” closing the case in that way, he said.
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In this case, the trustee had tried to strike a deal with Wachovia Bank and prepetition lenders&nbsp ; to fund the administration of the case. This is usually done through cash collateral on Hoboken’s liened assets, through a separate loan, or a combination of the two. No deal was struck, the trustee had no funds to administer the case nor to keep tabs on Hoboken’s myriad assets, and so filed to expedite the motion to dismiss.
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The motion was approved the following day. This was the same day Wachovia was asking the court for relief from the automatic stay, an injunction that automatically stops lawsuits, foreclosures and other collections against the debtor after a bankruptcy petition is filed. Wachovia was also trying to bar the trustee from using cash collateral to administer the case, according to the Motion to Dismiss.
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Hoboken had not yet filed its Schedules and Statement of Financial Affairs with the court, and the trustee reported it was not expected it would by the deadline of Nov. 23. The decision to file for dismissal was based on interviews with Hoboken representatives, the trustee said.
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“In the interests of equity for the other creditors and parties-in-interest of the estate, and in order to permit them to join the race to the courthouse, the Trustee believes and therefore avers that the case should be immediately dismissed, thereby returning all the creditors to their pre-petition positions and giving them equal opportunity to collect their obligations,” according to the Motion to Dismiss.