Color Spot Files for Chapter 11 Bankruptcy
On May 29, Color Spot Holdings and its three subsidiaries and affiliates filed for Chapter 11 in the Bankruptcy Court for the District of Delaware.
According to the bankruptcy filing, the company has between $50 and $100 million in assets but has liabilities of $100 to $500 million.
The company is currently looking for buyers of the business for a quick all-assets sale by mid-July.
Color Spot is headquartered in Temecula, California and has more than 2,000 wholesale and resale customers throughout the United States and reportedly is the largest greenhouse grower in the country.
The company has approximately 1,600 year-round, full-time employees (over 1,300 in production), and another 610 seasonal employees and a small number of year-round, part-time employees and independent contractors.
According to the bankruptcy filing, the company’s sales were $268 million in 2016 and $248 million in 2017.
In the bankruptcy filing, CEO Paul Russo said the company “suffered from declining market share and revenues since 2014, which has been the result of various contributing factors.”
Among those factors are the majority of the company’s nurseries are located in California, and were impacted by the six-year drought that ended in the spring of 2017. “That drought resulted in substantial water restrictions from 2014 through 2017 that impacted the Debtors’ operations.”
Another factor was the weather in Texas, where the company has most of its remaining facilities. Texas “experienced adverse weather events in 2015 and 2017, which negatively impacted the Debtors’ performance there.”
The third factor Russo mentioned in the filing said, “the Debtors’ focus on customer service waned as the Debtors grew in size, which translated into losses of certain markets with key customers.”
Russo said the company “intend[s] to sell their business as a going concern under section 363 of the Bankruptcy Code.”
Russo was appointed CEO in March of 2017 after the retirement of co-founder Jerry Halamuda the previous January.
Color Spot was founded 35 years ago by Halamuda and Mike Vukelich. Vukelich died in 2011.
This is a developing story. Check back for updates.
The company has “approximately $117.5 million in debt across three funded debt facilities, a subordinated promissory note related to a stock redemption in the approximate amount of $2.65 million (excluding accrued interest), approximately $20.7 million in unsecured trade debt and approximately $7 million in capital lease obligations.”