Schoep’s Ice Cream is one of the largest and oldest independent ice cream factories in the country. Since opening its doors in 1928, the Wisconsin-based business has grown to the point that it makes over 12 million gallons of ice cream every year. However, the company has fallen on hard times.
Schoep’s owners recently asked the courts to put it under receivership, which is an alternative to filing for bankruptcy. In its petition, the company revealed that it owns assets with a book value of $21.3 million, but has $19.1 million in debt. The company will not be able to pay off its creditors as its financial obligations come due, and it fears that the fair market value of its assets is significantly less than the book value.
For Sale — As Is, No Warranty
Because this is a receivership, and not a bankruptcy, the court-appointed attorney handling the case will be tasked with selling Schoep’s as an operating business, and distributing the money generated by the sale to the company’s creditors. There are reportedly already buyers interested, so this should not be a difficult task.
The goal is to have the company operate as the same business after the sale, with the same name and employees it has now. It will just have different owners and less debt — or perhaps different debt if the buyer has to finance the sale.
The Difference Between A Receivership And A Bankruptcy
This is a textbook example of how receiverships are different than bankruptcies.
If the company had filed for bankruptcy instead, it would either go through a restructuring or it would wind down operations and liquidate its assets. However, the financial problems the company is facing are reportedly due to the sudden loss of a couple of big clients. Unless this is the first sign of a shifting market, the company should be able to recover from this over the long-run and continue to churn out frozen treats to delight the masses.
Entering into a receivership allows the current owners to exit the business without shutting down the business. This is important to many business owners, who have poured their blood, sweat, and tears into building something they do not want to see die. Handing over control to a new owner is a better alternative than shutting down, laying off loyal employees, and seeing all that hard work go down the drain.
Helping Businesses In the Milwaukee Area Find A Path Forward
At Hanson & Payne, we have helped numerous business owners in the Milwaukee area navigate the receivership process. We have also advised business owners that are unsure if receivership or bankruptcy the best option. We have experience with both processes, so our firm can help business owners understand what their options are, and what choosing one over the other would mean for their business. Contact us today to schedule and initial consultation.