Posted on December 15, 2008 by Jason Cornell, Esq.

A Closer Look at the EZ Lube Bankruptcy

Introduction

EZ Lube, LLC, the Santa Ana, California based quick lube operator, filed for chapter 11 bankruptcy protection on December 9, 2008 in the United States Bankruptcy Court for the District of Delaware.  Read the EZ Lube bankruptcy petition here.  According to EZ Lube's Affidavit in Support of First Day Motions,  the Debtor operates 82 retail locations, the majority of which are located in Southern California.  EZ Lube began with one store in 1988 and implemented a business model whereby it opened new stores on leased property and acquired leasehold interests in all of the assets of the individually run stores.   At the time it filed for bankruptcy, EZ Lube employed approximately 1,000 employees including technicians, store managers, cashiers and service crew. 

Financial Information

At the close of 2007, EZ Lube had assets valued at $113 million, including $41.4 million in property and equipment.  During this same year, EZ Lube experienced a net loss of $44 million.  EZ Lube's liabilities total approximately $114 million, $94 million of which is owed to secured lenders and noteholders. 

Events Leading To Bankruptcy

Like many retailers, EZ Lube's bankruptcy was due in large part to the reduction in consumer confidence and poor economic conditions.  When the economy declines, consumers forego oil changes, or select less expensive services.  Worse still, higher gas prices resulted in consumers driving less, further reducing the demand for oil changes. 

EZ Lube has a large debt load - it currently pays $12 million annually in debt service.  Starting in April, EZ Lube began having trouble making its interest payments.  As stated in EZ Lube's Affidavit, EZ Lube's obligations are "cross-defaulted,"  meaning that defaults asserted against first lien credit agreements triggered defaults under EZ Lube's second lien credit agreements.

Objectives in Bankruptcy

Prior to filing for bankruptcy, EZ Lube retained an investment banking firm to assist with the marketing and sale of its assets.  EZ Lube seeks a buyer for substantially all of its assets.  To that end, it intends to hold an auction of its assets by March of 2009.  Read the EZ Lube Sale Motion here.

EZ Lube is represented by Pachulski Stang Ziehl & Jones LLP in this banrkuptcy proceeding.  The case is assigned to the Honorable Christopher S. Sontchi.  You can read Judge Sontchi's Chamber Procedures here.
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Posted on December 14, 2008 by Jason Cornell, Esq.

NetVersant Solutions Seeks Injunction Against its Suppliers and Subcontractors in Anticipation of the Sale of Its Assets

As many are aware, NetVersant Solutions, Inc. ("NetVersant" or "Debtors"),  a provider of voice, video and data communication services, filed for bankruptcy in the United States Bankruptcy Court, District of Delaware, on November 19, 2008.  Contemporaneous with its bankruptcy,  NetVersant filed an adversary action with the Bankruptcy Court seeking injunctive relief against against a long list of suppliers and subcontractors who are currently working on projects with NetVersant's customers.  NetVersant filed the adversary action in order to bar its suppliers and subcontractors from taking any action:

[T]o file, assert, collect on or otherwise enforce any lien, trust fund or other rights against any of the Debtors' customers, any property owned or leased by any customer, any payment made or to be made by any customer under or with respect to any contract between any Debtor and any customer, or any cash or receivables of any Debtor for 60 days.  Read the NetVersant Complaint for Injunctive Relief here.

 

 

As stated in its Complaint,  NetVersant seeks injunctive relief against its suppliers and contractors in order to prevent them from commencing "enforcement actions [that] will destroy the value of the Debtors' business and its ability to continue as a going concern."  On December 10, 2008,  the Bankruptcy Court entered the Order for Preliminary Injunction.  The Order provides NetVersant with injunctive relief through February 10, 2009.

On the same day that it filed for bankruptcy, NetVersant also filed a Motion Authorizing the Sale of Substantially All of Their Assets (the "Sale Motion"). Read the NetVersant Sale Motion here.  According to pleadings filed in NetVersant's adversary action,  NetVersant sought injunctive relief against its suppliers and subcontractors to preserve the value of its assets so they could be sold under the Sale Motion.  The Sale Motion is currently scheduled for a hearing on December 19, 2008. 
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