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MidPac targeted
for Chapter 7
liquidation
Creditors ask the court's
By Peter Wagner
help to recover debt
Star-BulletinIn an unusual move to reclaim property, three mainland building material suppliers are seeking to force the defunct MidPac Lumber Co. into bankruptcy.
A petition filed Jan. 18 in U.S. Bankruptcy Court by Forest Grove Lumber Co. of McMinnville, Oregon; Premdor Inc. of Walkerton, Ind. and Klupenger Lumber Co. of Portland, Oregon, asks that a trustee be appointed to take control of MidPac's assets.
The action -- seeking a Chapter 7 liquidation overseen by the bankruptcy court -- came a day before Midpac liquidated its property at public auction and several days after the debt-ladened company closed its Mapunapuna store.
The three petitioners -- seeking a total of $1,119,983 -- are among numerous creditors with millions of dollars in claims against MidPac.
The company has 20 days to respond to the petitioner's request.
Problems began at MidPac in June when CIT Group/Credit Finance Inc., a Los Angeles lender, withdrew more than $3.2 million in financing. According to Ted Phelps, a consultant to MidPac, the store made poor buying decisions.
The home improvements store held a series of fire sales before closing on Jan. 15. Results of the Jan. 19 auction, by San Francisco-based Rabin Brothers, were not available.
Meanwhile, several other hardware suppliers have sued MidPac in separate actions in Circuit Court, claiming unpaid bills for goods and services. One of them, Michigan-based Whirlpool Corp., is demanding payment plus damages from MidPac and its Maui sister company, Maui Home Supply, for products delivered on credit.
Maui Home Supply is owned by CG Investments, an offshoot of CGBN Inc., which bought MidPac in 1998. Maui Home Supply, which late last year closed one of its stores in Lahaina, was the largest Whirlpool distributor in the state.
According to a complaint filed by Whirlpool Oct. 29 in Circuit Court, MidPac allegedly transferred an undisclosed inventory of Whirlpool products to Maui Home Supply without payment to defraud creditors.
"The transfer of inventory to Maui Home Supply was accomplished as part of a concerted scheme to defraud the creditors of MidPac, including, but not limited to, Whirlpool," the complaint says. "Monies otherwise available to pay creditors of MidPac including Whirlpool were diverted to Maui Home" and other entities.
The complaint also alleges that payments were made by MidPac to pay for ground leases and other obligations of Maui Home Supply, also in financial trouble, according to the Whirlpool complaint.
Kurt Glassman, principal of both Maui Home Supply and MidPac, could not be reached for comment.
Among others seeking damages against MidPac are Kraftsmaid Cabinetry and Fleetwood Aluminium Products Inc. of Corona, Calif., jointly claiming $873,339.
