Eating Good in the Neighborhood Despite Bankruptcy Filing

On October 14, Wisconsin Apple LLC filed for Chapter 11 bankruptcy. The company owns 29 Applebee’s Grill and Bar locations across Wisconsin, and it claims all of them will remain open despite the company’s financial troubles. How is this possible? 

Chapter 11 Provides Flexibility 

It is possible because Chapter 11 bankruptcies help business owners work on reorganizing and retooling rather than forcing liquidation and shutdown. Under Chapter 11, a business may renegotiate debts, terminate certain contracts, sell off assets, and downsize or shut down portions of its business while continuing to operate. This flexibility is designed to help struggling businesses turn things around and get back on track. 

“We have had to make the difficult decision to file bankruptcy, which directly impacts a small number of restaurants in a limited area, following some aggressive actions by our lender,” Wisconsin Apple owner Seenu Kasturi said in a statement. “We will continue to adhere to the high standards our guests expect from us when they visit us and expect that there will be minimal impact on our team members.” 

An Applebee’s spokesperson stated the company expects to continue welcoming guests throughout the process.

An Incentive to Work Things Out 

Wisconsin Apple’s creditors have an incentive to work with the company to find a profitable path forward because the alternative is seeing the debtor convert the bankruptcy from Chapter 11 to Chapter 7 and wind down operations. In that scenario, creditors are less likely to get repaid any of the debts they are owed, or may only get pennies on the dollar. 

Such conversions are not unusual. Many businesses that file under Chapter 11 and continue to struggle, even after taking advantage of the benefits that the bankruptcy law provides, end up converting to Chapter 7 and winding the business down completely. A recent example is Toys R Us, which could not find a path to profitability or a buyer, and no longer exists.

Chapter 11 Is Not for Everyone 

While there are many benefits to filing for bankruptcy under Chapter 11, it does not work well for every business that wants to attempt to reorganize. It is a complex and expensive process. 

Recognizing this, Congress recently updated Chapter 11 by adding on a new section called Subchapter V. Subchapter V is designed to help small businesses go through a reorganization bankruptcy quickly and efficiently. To qualify, a debtor must be an individual, partnership, or corporation that: 

  • Is engaged in commercial or business activities;
  • Has no more than $2,725,625 of total debt; at least 50% of which must be from the business or commercial activities [note that this requirement has been altered due to the pandemic to allow more businesses to qualify, but it will supposedly snap back sometime in the future]; and
  • The debtor’s principal activity cannot be a single-asset real estate operation.

We are already seeing a number of small businesses in the Milwaukee area benefit from this new process. 

Milwaukee Bankruptcy Lawyers You Can Trust

Hanson & Payne, LLC is a trusted advisor to businesses in the Milwaukee area. We have a reputation for being business-minded in an industry that is often criticized for not understanding that legal action is a means to an end, not an end in and of itself. If you are looking for legal counsel in this challenging time, we would be honored to take your call. Contact us today to schedule an initial consultation.

Federal Judges Order Buyer Of Bankrupt Dean Foods To Sell Off Assets

Earlier this year, we blogged about the bankruptcy of Dean Foods, and the unique legal situation the buyer of its assets was in. Now we’ve got a bit of an update to share, and it is going to impact every dairy product sold under the Dean name in the state of Wisconsin. 

Dean Bankruptcy Sends Shockwaves Through The Dairy Industry 

Last November, Dean Foods filed for Chapter 11 bankruptcy. At the time, it was the largest milk processor in the country and the owner of significant assets here in Wisconsin. While there were concerns that the bankruptcy would cause a chain reaction of bankruptcies in America’s Dairyland, so far it does not seem like that is the case. (However, there are many things stressing the dairy industry at this time, and the Dean bankruptcy could be a contributing factor.)

The DOJ Steps In 

It has taken longer than normal to wrap up the Dean bankruptcy because the federal Department of Justice (DOJ) and the Wisconsin Attorney General filed a civil antitrust lawsuit against the Dairy Farmers of America Inc. (DFA) after it purchased some of Dean’s assets out of bankruptcy. The government argued that DFA would have too much power over the milk market if it were allowed to purchase all of the Dean Food assets it desired. 

What’s happening now? 

The dispute has just now been resolved. The federal judge handling the case approved a final judgment requiring DFA to divest two plants it had purchased, one in De Pere, Wisconsin, and one in Harvard, Illinois (also known as the Chemung plant) to another buyer within thirty days.  

DFA is also required to divest the intellectual property associated with the De Pere plant, including the exclusive right to using the “Dean’s” name in Wisconsin, Illinois, Indiana, and the Upper Peninsula of Michigan, and licenses for the “TruMoo” and “DairyPure” brand names nationwide.

Wisconsin Attorney General Josh Kaul agreed with the court’s decision, stating “this judgment will save critical Wisconsin jobs. Maintaining strong competition in Wisconsin’s dairy market is important for our state’s economy, especially as the economy continues to be impacted by the effects of the global pandemic.”

This will also have a significant impact on consumers in Wisconsin, although it is unlikely many will notice a difference in who is producing items under the Dean name. 

A Milwaukee Bankruptcy Firm You Can Trust

As we said in our previous blog, the government’s interference in this bankruptcy is not unprecedented, but it is somewhat unusual. Most businesses going through bankruptcy do not need to worry about the government taking such a strong interest in who buys their assets. Typically, high dollar cases and ones where the sale of certain assets could reduce competition or create a monopoly are the only ones closely examined by the DOJ or the Wisconsin AG. 

If you own or operate a distressed business, and are concerned filing for bankruptcy will not be a smooth process, we may be able to help. Hanson & Payne is a business-minded bankruptcy firm with deep roots in the Milwaukee area. Business owners and commercial lenders from across the state rely on us to counsel them and guide them through the bankruptcy process. We would be honored to assist you during your time of need.

Chapter 128 Receiverships Are Wisconsin’s Unique Alternative to Bankruptcy

Pictures of packed hospitals and the makeshift treatment center being set up at the Wisconsin State Fair Park in West Allis have many people under the assumption that healthcare providers are doing gangbusters during the pandemic. However, many healthcare providers are actually struggling to make ends meet as the public delays routine care and cancels elective treatments. Advance Pain Management, which operates ambulatory surgical centers across the state, is one of the latest providers to announce it is closing its doors in response. 

The company plans to wind down operations and sell off its assets under the supervision of a court-appointed receiver. The company is taking advantage of Wisconsin’s unique alternative to bankruptcy, Chapter 128 receivership, as it works toward a closing. 

What is receivership?

A receivership is an alternative to bankruptcy that Wisconsin lawmakers crafted in order to assist with the quick closing, sale, or restructuring of a company. While bankruptcy is federal law and is handled in the federal courts, a Chapter 128 receivership is Wisconsin law, and the cases are handled in our state courts.  

A receivership is so named because the court appoints a receiver to take over the business and run it with the interest of the company’s creditors in mind. 

When a business is closing down, like Advance Pain Management is, the receiver will be in charge of managing the sale of company assets. Oftentimes the assets are heavily discounted in order to get the money needed to pay off financial obligations and wind down operations as quickly as possible. 

When the business is not closing, it is the receiver’s job to dig into the company’s financial records and take a look at its operations in order to determine if the business can be effectively restructured and turned back over to the current owners, or if it is better to sell the whole thing to new owners. 

If the receiver can find a way to dig the business out of debt and restructure it so that it can become profitable once again, he or she may do so. In order to make the process more efficient than bankruptcy, the receiver has much more flexibility than a bankruptcy trustee has when it comes to determining which assets can be sold off, what debts should be renegotiated, and how to move forward. 

A receiver may also be charged with the continued operation of the business while a new owner is sought. If the business is being sold as a going concern, the receiver may choose to appoint an operating agent who will be tasked with managing the day-to-day dealings of the business. 

Receiverships Are a Good Option When Speed Is Key

Compared to Chapter 7 or Chapter 11 bankruptcy, a Chapter 128 receivership may be a faster and cheaper way to resolve a business’s financial woes. They are definitely an option business owners in the Milwaukee area should consider if they are in financial distress. 

The Hanson & Payne team can advise any business owner of the pros and cons of receivership, and outline what choosing to go into receivership or file for bankruptcy would mean going forward. Please contact us today if you would like to schedule a meeting with one of our experienced attorneys.