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MidPac Lumber
By Peter Wagner
liquidation ordered
Star-BulletinMidPac Lumber Co. has been ordered into bankruptcy after a mainland creditor sold the company's assets last month claiming the building supplier defaulted on an $8 million loan.
U.S. Bankruptcy Judge Lloyd King granted an involuntary Chapter 7 bankruptcy earlier this week, requiring proceeds of a recent liquidation auction and other assets be turned over to the court to be split up among creditors.
MidPac, a holding of CGBN Inc., in August began liquidating its merchandise under pressure from The CIT Group/Business Credit Inc., a California-based lender. MidPac closed its doors and auctioned its remaining assets last month.
According to court records, proceeds of the Jan. 19 auction -- $742,970 -- are being held by CIT.
CIT filed a request in bankruptcy court two weeks ago asking to keep the proceeds. The lender said MidPac owes $2,352,733 of an $8 million loan signed in March 1998.
But three mainland building suppliers last month filed a petition asking that MidPac be put involuntarily into a Chapter 7 bankruptcy. MidPac did not respond with the required 20-day period, automatically triggering the bankruptcy.
Under Chapter 7 of the federal bankruptcy code, a debtor's assets become the property of the court, which then divides them among creditors according to a system of priorities.
The three creditors seeking the involuntary bankruptcy -- Forest Grove Lumber Co. of McMinnville, Ore., Premdor Inc. of Walkerton, Ind., and Klupenger Lumber of Portland, Ore. -- are claiming a total of $1,119,983 in debts from MidPac. They are among numerous creditors identified in the filing.
The creditors filed for the bankruptcy on Jan. 18, a day before MidPac liquidated its goods at a public auction.
CIT claims its loan to MidPac is secured by a first-priority lien on the company's property. The company said MidPac also may have uncollected assets including $50,000 in unpaid bills, a $180,043 promissory note, and possible legal claims against third parties.
According to CIT's filing, MidPac has no other property "of any significance."
MidPac parent CGBN is controlled by businessman Kurt Glassman, whose related company CG Investments owned Maui Home Supply. Maui Home Supply recently closed both of its stores on Maui and liquidated merchandise.
Glassman, also associated with Pacific Advisory Group, could not be reached for comment yesterday. Court records show Glassman with an address in Palos Derdes Estate, Calif.
Two weeks ago he declined to comment on the impending bankruptcy, saying it was "premature" to discuss the matter.
Meanwhile, several other 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 and damages from MidPac and Maui Home Supply, formerly the largest Whirlpool distributor in the state.
According to an Oct. 29 civil complaint filed by Whirlpool, MidPac allegedly tried to defraud creditors by transferring an undisclosed inventory of Whirlpool products to Maui Home Supply without payment to the affiliate company. The complaint also alleges that payments were made by MidPac to pay for ground leases and other obligations of Maui Home Supply.
