Carolina Tomato shuts doors, owes millions
Carolina Tomato shuts doors, owes millions
Carolina Tomato Inc. in Columbia, SC, has ceased operations and owes its creditors as much as $15 million.
The firm's attorney, O. Max Gardner III, sent a letter dated Jan. 23 to many of the firm's produce creditors asking that they do not take legal action and instead consider a yet-to-be determined settlement offer.
In his letter, Mr. Gardner said that he expects to have a disclosure ready in 10 days, which is expected to detail assets and debts. Mr. Gardner said that there was potentially $6 million of debt that would be forgiven by two different creditors if the other creditors would agree to the "desired universal settlement."
Michael Keaton of Keaton & Associates, an attorney who specializes in PACA cases and produce industry law, said that he represents a number of creditors in this case with unpaid bills totaling $7 million. "Judging from the size of the claims I have, which are averaging $600,000 to $700,000 per company, I think Carolina owes at least $15 million."
Mr. Keaton said that his clients have agreed to give Mr. Gardner the 10 days he has requested to complete the disclosure statement before taking further action, partly because of Mr. Gardner's reputation.
"I know him and I trust that this is the best way to proceed at this time," said Mr. Keaton.
But he expressed surprise that no other creditor has taken legal action, which would force Carolina Tomato into bankruptcy.
"We check the courts every day, and as of this afternoon no one had filed," he said Jan. 31. "Typically someone would have filed by now."
Other attorneys specializing in PACA law as well as a representative of The Blue Book did not expect the default total to reach $15 million based on rumors that they have heard.
One attorney said that if it was truly that much debt, he would expect much more buzz about the operation closing its doors than he has heard. He suspects that some creditors have inflated their claims but agreed that Carolina Tomato has gone out of business owing a large sum of cash and that there is no way the receivables will come close to covering those debts.
Mr. Keaton agreed, stating that he had done an asset search and found that the firm and its principals do not appear to have any major assets.
In his letter, Mr. Gardner said that his office was "in the process of collecting all receivables owed to Carolina, and of liquidating all of the real and personal property of the corporation. The purpose of these actions will be to create a settlement fund to use to try and resolve all of the outstanding claims."
He also indicated that a third-party had committed "to provide an additional cash contribution to the settlement fund."
Industry experts familiar with these types of cases -- but not this one in particular -- said that it would appear that most creditors are giving the company an opportunity to structure its own settlement because there are very few tangible assets.
"You have to figure out what the best way to get paid is and act accordingly," said one of the experts. "In this case, it appears that the best opportunity is the additional funds from a third party. It doesn't do you any good if you get aggressive, force the company into bankruptcy and then there are very few assets to split."
There was speculation about the source of the additional funds as well as the willingness of two creditors to waive as much as $6 million in debt, but those same people said that their most prudent course was to wait for the disclosure statement from Mr. Gardner, which was expected by Friday, Feb. 2. Mr. Gardner was unavailable for comment, and no one answered repeated phone calls to Carolina Tomato Inc.
The firm's attorney, O. Max Gardner III, sent a letter dated Jan. 23 to many of the firm's produce creditors asking that they do not take legal action and instead consider a yet-to-be determined settlement offer.
In his letter, Mr. Gardner said that he expects to have a disclosure ready in 10 days, which is expected to detail assets and debts. Mr. Gardner said that there was potentially $6 million of debt that would be forgiven by two different creditors if the other creditors would agree to the "desired universal settlement."
Michael Keaton of Keaton & Associates, an attorney who specializes in PACA cases and produce industry law, said that he represents a number of creditors in this case with unpaid bills totaling $7 million. "Judging from the size of the claims I have, which are averaging $600,000 to $700,000 per company, I think Carolina owes at least $15 million."
Mr. Keaton said that his clients have agreed to give Mr. Gardner the 10 days he has requested to complete the disclosure statement before taking further action, partly because of Mr. Gardner's reputation.
"I know him and I trust that this is the best way to proceed at this time," said Mr. Keaton.
But he expressed surprise that no other creditor has taken legal action, which would force Carolina Tomato into bankruptcy.
"We check the courts every day, and as of this afternoon no one had filed," he said Jan. 31. "Typically someone would have filed by now."
Other attorneys specializing in PACA law as well as a representative of The Blue Book did not expect the default total to reach $15 million based on rumors that they have heard.
One attorney said that if it was truly that much debt, he would expect much more buzz about the operation closing its doors than he has heard. He suspects that some creditors have inflated their claims but agreed that Carolina Tomato has gone out of business owing a large sum of cash and that there is no way the receivables will come close to covering those debts.
Mr. Keaton agreed, stating that he had done an asset search and found that the firm and its principals do not appear to have any major assets.
In his letter, Mr. Gardner said that his office was "in the process of collecting all receivables owed to Carolina, and of liquidating all of the real and personal property of the corporation. The purpose of these actions will be to create a settlement fund to use to try and resolve all of the outstanding claims."
He also indicated that a third-party had committed "to provide an additional cash contribution to the settlement fund."
Industry experts familiar with these types of cases -- but not this one in particular -- said that it would appear that most creditors are giving the company an opportunity to structure its own settlement because there are very few tangible assets.
"You have to figure out what the best way to get paid is and act accordingly," said one of the experts. "In this case, it appears that the best opportunity is the additional funds from a third party. It doesn't do you any good if you get aggressive, force the company into bankruptcy and then there are very few assets to split."
There was speculation about the source of the additional funds as well as the willingness of two creditors to waive as much as $6 million in debt, but those same people said that their most prudent course was to wait for the disclosure statement from Mr. Gardner, which was expected by Friday, Feb. 2. Mr. Gardner was unavailable for comment, and no one answered repeated phone calls to Carolina Tomato Inc.
