Information for Creditors of LWO Acquisitions Company LLC d/b/a Circuitronics, Inc.
Case Number 22-40256 in the United States Bankruptcy Court for the Northern District of Texas
CIRCUITRONICS BUSINESS HISTORY
Circuitronics, Inc. has filed for bankruptcy under its true legal name, LWO Acquisitions Company LLC. The company was founded in 1971 and has a history of steady operations. According to papers filed in the bankruptcy case, “the Debtor is a provider of specialized printed circuit board (“PCB”) assembly and related electronic manufacturing services. The Debtor offers a broad set of capabilities to customers, including prototype development, complex and ruggedized PCB assembly, electromechanical assembly, system integration/configuration, and direct fulfillment solutions.”
The Debtor works with customers in many different sectors, including industrial, energy, security/mil-aero, communications, audio visual, and prototype markets. It prides itself on its agile, high quality, reliable products and solutions.
Circuitronics employed nearly 120 individuals in late 2019, but due to recent business disruptions, it currently employs only 53 individuals. However, the Debtor is optimistic about its future. While the company will likely emerge from bankruptcy under different ownership than when it filed the case, the company will continue to operate and has new orders lined up to help it build into the future.
WHAT LED TO THE BANKRUPTCY FILING
As is often the case these days, the circumstances created by the COVID-19 pandemic have weighed heavily on the Debtor’s business. Before the global shutdowns began to be implemented, the Debtor’s largest customer, who made up “approximately 40%-60%“ of the Debtor’s annual revenue, was a provider of audio and video for “large concert, performance, and convention venues.” Obviously, the orders from this customer were reduced or eliminated completely for several months during 2020 and 2021.
On top of the severe revenue constraints that this put on the Debtor’s business, the still-developing supply chain shortages are now adversely affecting the company. Since the Debtor works in electronics manufacturing, the extreme “chip” shortage that is impacting so many markets right now is also making it difficult or impossible for Circuitronics to get products completed as quickly as their customers expect.
With these issues piling up, the Debtor also found itself looking at the possibility of having to pay a huge repair bill on the building it was renting. Under its lease, the Debtor agreed to pay for building repairs, but a sinking foundation was causing stabilization issues that could have cost more than $1 million to fix. The Debtor has moved to a new space and is seeking to reject its old lease in the bankruptcy.
WILL CREDITORS BE REPAID?
On the numbers, the prospect of repayment to unsecured creditors looks grim in this case but hope is not all lost. Circuitronics reports that it has around $12.4 million in assets as compared to $29.9 million in liabilities. Of this amount, roughly $24.3 million is secured debt owed to Gladstone Capital. While we do not yet have a specific breakdown of other liabilities, we do know that the Debtor has over 200 creditors, so we can assume that a large chunk of the remaining ~$5.6 million in liabilities is unsecured debt owed by the Debtor to trade vendors.
Since the secured creditor is owed nearly twice what the Debtor states its assets are worth, the secured creditor has agreed to basically buy the company out of the bankruptcy case through a procedure called a “Plan of Liquidation.” This is good news for unsecured creditors because they will have an opportunity to voice their opinions on the plan and potentially make objections asking to be paid their fair share.
Unsecured creditors may want to form an official committee of creditors. If a committee is formed, it can hire lawyers who would advocate for the repayment of unsecured creditors, but be paid for by the Debtor. In this way, creditors can make their voices heard without having to come out of pocket for the legal bills. If you have questions about committees or this bankruptcy case, please feel free to reach out to PRLT.
PRLT does not represent LWO Acquisitions Company LLC d/b/a Circuitronics, Inc. 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 Circuitronics bankruptcy case or anything discussed on this page, please contact us.