On July 23, 2015, Corporate Resource Services, Inc. and 7 affiliates filed voluntary chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware. The cases are docketed as case no. 15-11546, and are assigned to The Honorable Mary F. Walrath. The filing appears to be the final steps in an orderly wind down of the companies that began in February, 2015.
The Chief Restructuring officer of CRS, J. Scott Victor, has filed a declaration in support of the petitions. According to Mr. Victor, CRS was a provider of corporate employment and human resource solutions, headquatered in New York. Since February 2015, CRS has been engaged in an orderly wind down of its operations, including reducing its staffing, collecting receivables and liquidating its other business assets.
According to Mr. Victor, the wind down began when it was discovered that one of the debtors' professional employer organizations (PEO) had failed to remit certain taxes to taxing authorities, consisting mostly of employee withholdings, estimated at that time to be nearly $80 million.
That discovery curtailed the debtors' ability to refinance its debt with Wells Fargo; but Wells Fargo agreed to fund a wind down of the debtor's operations for a limited period. Part of the agreement to fund a wind down required the chapter 11 filing of the PEO. The PEO filed a chapter 11 case in New York which case is still pending.
Mr. Victor states that as a result of the wind down to date, Wells Fargo has been paid approximately $60 million, representing the outstanding principal and interest obligations on the debtors' loans. However, according to Mr. Victor, Wells Fargo has continued to tightly control the debtors' cash to cover potential overdrafts and future indemnity obligations. The debtors' dispute Wells Fargo's claims and have reserved all rights against Wells Fargo for its prepetition actions.
The PEO has also asserted a claim against the debtors' of $60 million. The debtors dispute the PEO's claims and claim that the PEO destroyed the debtors' value.
As a result of the bankruptcy filing, the debtors' hope to gain valuable time to continue the liquidating of their assets including finding an appropriate buyer for their receivables.