At the request of NanoMech, its bankruptcy was rejected

A judge has dismissed the bankruptcy of Springdale-based NanoMech at the company’s request.

In an order issued Tuesday, Judge John Dorsey of the Delaware District Bankruptcy Court granted the termination, noting that it was in the best interests of the debtor, the estate and those involved. The order also dismisses all conflicting bankruptcy-related cases.

Bankruptcy began just over a year ago when CEO Jim Phillips retired weeks before NanoMech filed for Chapter 11 bankruptcy protection on April 15, 2019. NanoMech claimed 7.2 million dollars in assets and owed nearly $ 19 million to its creditors, according to early bankruptcy filings. .

In mid-April 2020, NanoMech applied to the court for the dismissal, noting in court documents that its business no longer existed after a court-approved sale and that there was a minimum of assets to distribute to the remaining creditors. or to pay in legal costs in progress.

NanoMech has said in court documents that it neither has the capacity to uphold the Chapter 11 case nor to confirm a debt reorganization plan. The Springdale company said that continuing the case would result in the mere accumulation of additional administrative expenses by NanoMech that it would not be able to pay.

Joshua Silverstein, a professor at the WH Bowen School of Law at the University of Arkansas at Little Rock, who researches and writes on bankruptcy law, said in the Chapter 11 cases the dismissal became a common way to end bankruptcy. He said a discharge is usually requested in Chapter 11 cases when the company intends to reappear as a business entity after reorganizing its debts. Layoffs, Silverstein said, are common when a company sells its assets and shuts down.

The Chapter 11 process is generally chosen, he added, because it gives the debtor more control over how they process their assets and debts, including the sale of a company in their own. entirety.

“What you often find is that there are no companies left to unload,” said Silverstein.

Last week, Dorsey approved NanoMech’s request to abandon its old corporate offices and manufacturing facility in Springdale.

NanoMech applied to the court in early May for permission to relinquish ownership of 2447 Technology Way in Springdale. According to court documents, the property has two mortgages, one owned by Arvest Bank for $ 1.5 million and a second owned by Arkansas Economic Development Corp. for $ 500,000.

NanoMech argued that it was in the estate’s best interests to give up the property, as it was unlikely that a sale would earn enough to cover the mortgages.

In April, Dorsey approved a settlement between the officers and directors of NanoMech and its principal secured creditor, Michaelson Capital of New York.

The agreement provides a general version to the directors and officers of NanoMech. In return, the insurer of the directors and officers will pay NanoMech $ 1.7 million, of which approximately $ 1.68 million will go to Michaelson and $ 20,000 to the NanoMech estate. The agreement also includes funds allocated to pay the unpaid quarterly fees in the case.

After receiving payment, Michaelson has agreed to release NanoMech from all claims and the directors and officers of the company will release Michaelson and others from all claims. The settlement resolves and eliminates disputes between the parties regarding the cause of the company’s bankruptcy.

NanoMech was founded in 2002.

At the end of July, the court approved the sale of most of NanoMech’s assets without lien or other legal charges to P&S Holdings for $ 8 million. The sale closed at the beginning of August. P&S is a subsidiary of Vinmar International Ltd. of Houston, a global marketing, distribution and project development company serving the petrochemical industry.

Business 05/28/2020

CLARIFICATION: According to Springdale-based NanoMech, a third-party review of NanoMech’s business and financial activities, which included the eight-year period that former CEO Jim Phillips headed, was conducted. The post-bankruptcy board review determined that Phillips had acted appropriately and that there had been no wrongdoing on his part or the pre-bankruptcy directors and officers. The timing of deposits and settlement was not clear in previous articles on the bankruptcy case.

About Marc Womack

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