Information for Creditors of CE Electrical Contractors LLC
Case Number 21-20211 in the United States Bankruptcy Court for the District of Connecticut
THE DEBTOR HAS A HISTORY OF SUCCESS
CE Electrical is an electrical sub-contractor for public and private construction jobs. It performs all manner of electrical work, including new construction, remodels, and service on existing systems. Since its formation in 2008, CE Electrical has grown steadily, primarily through repeat business and referrals, but also through submitting bids on projects.
In 2017, CE’s gross revenues were around $7 million. That number grew to nearly $14 million in 2020. Yet, while gross revenues were increasing, net profits were dropping precipitously, to the extent that CE actually lost approximately $3.67 million in 2020 despite its historically high gross income number. This outcome resulted from an overly ambitious expansion into Florida by the Connecticut-based company, which was coupled with an overbearing project load. CE’s new hires were not up to their typical standards and ultimately ended up costing CE more than they should have without even performing the work required.
While the Debtor has gotten itself into an impossible financial situation, it has recognized its mistakes. The Debtor intends to drastically scale back its operations and go back to what was working before the disastrous expansion. While this plan necessarily involves the Debtor taking in less money on a gross revenue basis, it leads the Debtor back to profitability. All creditors will benefit if the Debtor can successfully implement its plan.
CREDITORS ARE ENTITLED TO INFORMATION
A 341 meeting is conducted in each Chapter 11 Bankruptcy Case by the United States Trustee’s attorney. The Debtor’s representative – usually its CEO – is required to attend. At the 341 meeting, the United States Trustee and creditors ask the Debtor’s representative questions about the Debtor’s finances, why the Debtor is in bankruptcy, and how the Debtor intends to repay its creditors.
The 341 meeting in this case concluded on April 23, 2021. The meeting is a matter of public record. So, while creditors no longer have the opportunity to attend and ask questions, they are able to obtain and listen to a copy of the 341 meeting from the United States Trustee. This meeting may contain valuable information for creditors, including:
- If the Debtor has a plan to pay past and current taxes to the state and federal governments, since nonpayment of taxes can ruin an otherwise optimistic Debtor’s hopes of emerging from bankruptcy.
- How the Debtor intends to classify its various creditors and if the Debtor will treat certain creditors, like those connected to the allegedly “unprofitable” projects that the Debtor has abandoned, differently.
- Whether the Debtor has substantial contracts related to abandoned projects that it intends to reject, causing additional unsecured claims to accrue.
WHILE THERE ARE A LOT OF QUESTIONS TO BE ANSWERED, CREDITORS STAND TO BENEFIT
The filings in the bankruptcy case have raised a lot of questions for creditors. Among them, creditors are left to wonder whether the Debtor’s substantial downscaling will result in them pulling their business out of Florida. While stopping operations could be a net benefit to the estate, pulling out of Florida could cause the Debtor to add significant claims, which may decrease payout to other creditors.
Additional questions include: (1) whether all of the vehicles listed in the Debtor’s schedules are necessary to the business; (2) whether all or any portion of the PPP loans, totaling $1,320,491, are forgivable; (3) if the Debtor has overpaid insiders or affiliates; and (4) how the Debtor intends to deal with the lawsuits filed against it by the predatory “hard money” lenders it resorted to in a last-ditch effort to survive prior to filing for bankruptcy.
Competent counsel for creditors can address these questions and any others that may arise efficiently. While it may seem overwhelming, there are no issues in this case that an experienced Chapter 11 bankruptcy attorney has never seen before. This is good news for creditors. If a Committee is formed, counsel will be able to work with the Debtor and the Debtor’s professionals to develop a comprehensive Bankruptcy Plan to address the Debtor’s debts, satisfy creditors, and preserve ongoing working relationships between the Debtor and its sub-subcontractors, vendors, and suppliers.
PRLT does not represent CE Electrical Contractors. The content on this page is provided for informational purposes only. Nothing on this page or this website creates an attorney/client relationship between you and PRLT. Nothing on this page is legal advice. If you have any questions about the CE Electrical bankruptcy case or anything discussed on this page, please contact us.