Information for Creditors of Electronic Data Magnetics, Inc.
Case Number 21-10222 in the United States Bankruptcy Court for the Middle District of North Carolina
THE DEBTOR & ITS BUSINESSES
In Chapter 11, it is common to talk about multiple debtors whose bankruptcy cases get “jointly administered” because they are all involved in a common business venture. The Electronic Data bankruptcy is different because it is only one Debtor but runs multiple businesses. EDM was forced to file for bankruptcy after COVID-19 decimated the mass transit industry, which is EDM’s primary client base.
The main business of EDM is the manufacture of RFID and magnetic stripe revenue collection tickets for mass transit clients. One of EDM’s largest clients in this line of its business is the MTA – the Metropolitan Transit Authority in New York. When the company was founded in 1983, it began by manufacturing computer tabulating cards. EDM has kept up with technology and now produces tabulating cards, radio frequency identification (“RFID”) tags, and magnetic stripe products.
More recently, EDM began offering a line of high-quality label products that are 100% made in the USA with EDM’s superior digital print technology. This line is marketed and sold under EDM’s Label America brand.
THE DEBTOR IS A FAMILY BUSINESS
The Debtor’s representative in the bankruptcy case is H. Richard Hallman, who is the Debtor’s Chairman of the Board of Directors, and has been since its inception in 1983. Hallman has also served as the President and Chief Executive Officer of EDM for over 32 years, collectively. From July 2015 through April 2021, Hallman’s son, H. Russell Hallman, served as President and CEO. The four members of the Board of Directors of the Debtor are all Hallman family members.
Obviously, the Debtor has benefitted from continuous management and ownership. However, the initial filings in the Chapter 11 case also disclose that the Debtor is renting its physical locations from “Hallman Properties LLC.” As of now, the bankruptcy filings do not contain any information about this company but it is reasonable to assume that it is owned by the same Hallman family that owns the Debtor.
This is a common arrangement in close, family-held companies and is not necessarily a problem. Creditors simply need to be aware of these types of arrangements and ensure that they are appropriately priced and fair to the Debtor.
A SALE OF EDM IS ANTICIPATED
Only a small amount of information has been filed in the Debtor’s bankruptcy case so far. More information will be provided in the near term, including disclosure of compensation of officers and directors of the company and detailed asset and liability information. Creditors will have a chance to ask the Debtor’s representative questions about the business, including what led it to file for bankruptcy and how it hopes to exit bankruptcy at the meeting of creditors, or 341 meeting, which is scheduled to take place on May 17th.
Despite the lack of detailed information, the Debtor has revealed in its filings that it intends to pursue a going concern sale of the business. It hopes that it will be able to preserve employee jobs and the the nearly 40-year-old company through such a sale.
Creditors have the opportunity to participate in the bankruptcy case and the sale process, if it occurs. Unsecured creditors may form a committee of creditors to represent the rights and interests of all unsecured creditors. Through a committee, creditors will have a voice in the case and can help drive a positive outcome.
PRLT does not represent Electronic Data Magnetics or any party in the bankruptcy case. 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 Electronic Data Magnetics bankruptcy case or anything discussed on this page, please contact us.