An involuntary Chapter 11 Bankruptcy Petition was filed against Ply-Marts, Inc. (a/k/a Ply-Mart and PlyMart) on July 1, 2008. Ch. 11 (Invol.) Case No. 08-72687. See the petition here. The petition was signed by Dixie Plywood Company of Atlanta, JB Hunt Transport, Inc., and Primesource Building Products, Inc..
As discussed in this post, Ply-Marts consented to the appointment of a receiver in the U.S. District Court last week.
The primary element required to prevail on an involuntary petition is that the would-be debtor is not paying its debts as they become due. See 11 U.S.C. §303. Given the Consent Order in the District Court case, it will be difficult for Ply-Marts to overcome this allegation –
E . In the fall and winter of 2007, Ply-Marts experienced significant financial difficulties, and by no later than early 2008, events of Default under (and as defined in) the Loan Agreement had occurred and continue to exist .problems have intensified and accelerated to the point that there is imminent danger that Plaintiffs interests in the Ply-Marts Collateral will be irreparably harmed.
G. Ply-Marts’ financial problems have intensified and accelerated to the point that there is imminent danger that Plaintiffs interests in the Ply-Marts Collateral will be irreparably harmed.
H. Ply-Marts has commenced an orderly wind-down and liquidation of its lumber products business . The remaining operating divisions of Ply-Marts have sustained and continue to sustain substantial operating losses .
It appears more likely that Ply-Marts will either not contest the involuntary petition, as in most cases, or it could file its own Chapter 7 or 11 petition. Although the Receiver is still in control of the company, its board of directors likely have the authority to consent to bankruptcy relief even over the objection of the Receiver.