GuildMaster secures Ch. 11 reorganization

A small group of unnamed investors has committed more than $1 million in capital to help Springfield-based home furnishings manufacturer GuildMaster Inc. chart a new course through bankruptcy reorganization.

Nine months after filing for Chapter 11 bankruptcy protection, a federal judge in the Western District of Missouri approved GuildMaster’s reorganization plan that includes a purchase agreement by management and the investor group.

U.S. bankruptcy Judge Arthur Federman’s Sept. 26 decision comes a month after the beleaguered company was sentenced to five years of probation for illegal imports. GuildMaster pleaded guilty in mid-July to three months of importing lamps with counterfeit safety certification labels from a wholly owned Chinese manufacturer. Amid the federal investigation, a big chunk of its inventory was confiscated in the first quarter of last year.

“We have weathered 20 months of navigating a raging storm, but the storm has passed,” GuildMaster CEO Steve Crowder said in a news release.

Crowder was unavailable for further comment, according to Anne Wear of North Carolina-based public relations firm McNeill Communications Group Inc.

Under the amended plan of reorganization, 25 creditors voted to receive more than $2.5 million – the largest payback, $1.72 million, to secured creditor Guaranty Bank. Another secured claim in the bankruptcy court records, by international freight company OEC Group Inc., garnered a payback of $274,000.

Guaranty Bank Marketing Director Carlye Wannenmacher declined an interview, citing bank policy that prohibits discussing confidential customer information.

Label fiasco
GuildMaster’s lamp-labeling fiasco dates back to December 2011, when U.S. Customs and Border Protection agents discovered lamps imported by GuildMaster bore counterfeit Underwriters Laboratories product safety labels. Between January and March 2012, customs agents seized 10 shipments of GuildMaster lamps manufactured by Westway Enterprises Pvt. Ltd. in China. In all, the company forfeited 5,585 lamps valued at $1.8 million, according to its plea agreement.

GuildMaster has maintained its agents and employees had no knowledge the UL labels were being applied and that it was violating U.S. laws by importing the lamps. In the plea, company officials did acknowledge employees of Westway Enterprises, its wholly owned Hong Kong-based subsidiary, knew its factory in Dongguan, China, wasn’t UL certified.

Under the reorganization plan, GuildMaster is leaving it to Guaranty Bank to retrieve the lamps from customs agents.

“The debtor defers to the bank to prosecute whatever rights it may claim in the impounded lamps in the criminal action at its cost and expense,” the plan states. Should the bank secure the lamps from the government, it can elect for GuildMaster to sell them on its behalf.

GuildMaster is governed by a five-member board of directors, which includes Crowder and Steven Fox, a regional president for U.S. Bank in Springfield. Wear said all board members deferred to Crowder for comment.

Fox had served as CEO of Quest Capital Alliance LLC, a local venture capital firm that between 2004 and 2006 provided GuildMaster $2.75 million in debt and equity funding.

Modified payments, ownership
David Schroeder, a 30-year Springfield bankruptcy attorney who specializes in Chapter 11 filings, said companies often secure private investors as they work to develop reorganization plans. “One of the reasons a company is often forced to seek relief in bankruptcy is to buy additional time to see if an opportunity presents itself or to complete a plan that has been put in place, but because of the pressure of creditors or collection action that is disruptive to the business, they can’t get that done,” he said.

In its bankruptcy petition filed Dec. 13, 2012, GuildMaster reported estimated assets and liabilities both in the $1 million to $10 million range.

A filing creates an automatic injunction against collection action, giving the debtor 120 days to submit a plan to put before creditors. While the OEC Group had objected to the original plan of repayment, it withdrew its objection on Sept. 18 after modifications, and all of GuildMaster’s creditors ultimately agreed to the terms. The filing reported an estimated 50 to 99 creditors.

Schroeder said a Chapter 11 reorganization plan structures repayments under a single umbrella. “If a business is plagued with delinquent accounts payable and is receiving pressure from creditors, which may include their primary banking relationship, then to manage that in one form is one of the benefits of a Chapter 11,” he said.

The reorganization also effectively regulates the company as private. The company had operated as a public company trading Pink Sheets over-the-counter under the symbol GLDU. The move to OTC stock a few years ago coincided with a recapitalization that allowed GuildMaster to shed more than $3 million in debt and exchange its outstanding preferred stock for equity.

“The company has been trading on the OTC bulletin board since 2009. Until recent events, it had no plans to become a privately held company,” Crowder said in the company’s release.

Web Editor Geoff Pickle contributed to this article.[[In-content Ad]]