In July of this year, Ascendia Brands, Inc., began filing preference actions against various defendants who allegedly received payments from Ascendia. According to the complaints, the defendants, many of whom were former customers of the company, received “avoidable” payments either before or after Ascendia filed for bankruptcy. Citing various provisions of the Bankruptcy Code, Ascendia alleges that the recipients of these payments are required to return the funds to Ascendia. This post will look briefly at Ascendia’s business operations, why it filed for bankruptcy and what the next steps will likely be for the preference actions Ascendia filed with the Bankruptcy Court.
Ascendia manufactures and sells health and beauty products throughout North America and across the globe. According to the Declaration of Douglas Booth, Ascendia’s Chief Restructuring Officer, Ascendia distributes its products through “mass merchants” such as Walmart, Target, Walgreens and Dollar General Stores. See Booth Decl, pghs. 5-6. A copy of the Booth Declaration as originally filed with the Delaware Bankruptcy Court is available here for review.
In 1920, Ascendia started as the Lander Co., Inc., selling cosmetics within the United States. From 1920 to 1950, Lander Co. grew to thirty brands and four subsidiaries. In 2003, a private equity firm, Hermes Group, LLC, acquired Lander Co.. Two years later, Hermes merged with Cenuco, Inc.. Following the merger of Hermes and Cenuco, the merged entity changed its name to Ascendia Brands, Inc.. Booth Decl., pghs. 7-8.
Events Leading to Bankruptcy
Starting in early 2008, Ascendia’s revenues fell below the company’s forecasted projections. The company attributed the drop in revenue to higher than expected costs and lower than expected sales from the company’s “Healing Garden” and “Calgon” line of products. In addition, and like many other debtors before it, Ascendia points to the overall decline in economic conditions and the negative effect such conditions have had on the company’s profitability. Booth Decl., pghs. 40-41.
Ascendia filed for bankruptcy on August 5, 2008 (review Ascendia’s Bankruptcy Petition here). In the months prior to bankruptcy, Ascendia sustained net operating losses of $7.1 million (June 2008) and $9.2 million (May 2008). Prior to bankruptcy, Ascendia began discussions with its lenders regarding a possible restructuring of the company or a sale of assets.
After filing for bankruptcy, Ascendia conducted a sale of assets under section 363 of the Bankruptcy Code. On November 25, 2008, the Bankruptcy Court approved an asset purchase agreement between Ascendia and Ilex NewCo. LLC. A copy of the Order approving the sale to Ilex is available here.
Procedural Posture of the Preference Actions
At the time of this post, many of the adversary actions filed by Ascendia do not include Summons. The Summons often will state the date of the first pretrial status conference scheduled before the Court. Once a pretrial status conference is scheduled, Plaintiff’s counsel may begin to circulate a proposed scheduling order similar to the scheduling order that is often used in this jurisdiction. A copy of the form scheduling order provided by the Delaware Bankruptcy Court is available here for review.
The Ascendia bankruptcy proceeding is before the Honorable Brendan L. Shannon of the United States Bankruptcy Court for the District of Delaware. Plaintiff’s counsel is represented by Young Conaway Stargatt & Taylor LLP.