Wednesday, July 18, 2012
In the final month before it filed for bankruptcy, internal memos, bankruptcy filing documents and reports from company employees show that Maritime Services Corporation ran out of ways to keep the company going in its current state.
Three days after the marine interior design and build-out company filed for Chapter 11 bankruptcy protection on June 26, Maritime CEO George Selfridge sent a letter to Maritime employees, outlining the changes which were occurring.
“I am writing to inform you firsthand that we were forced into Chapter 11 bankruptcy reorganization this week. This came as a result of our lender cutting off our line of credit and seizing our accounts,” Selfridge wrote in his June 29 letter to employees.
“The good news is that we are now operating under the protection of the bankruptcy court. This will give us the breathing room to hopefully sell our company to a better capitalized competitor and to hopefully preserve all of our jobs.”
For some Maritime employees, though, it was already too late. Several had been laid off two weeks prior as the company faced a salary crunch due to low demand.
Among those was the company’s then-Vice President of Commercial Sales Nathan Brennan, who said he was in a meeting two weeks prior to the bankruptcy filing with several representatives in the company administration, when the call for volunteers to take layoffs.
Brennan raised his hand.
“We couldn’t buy anything so I couldn’t sell anything,” he said of his reasoning.
He knew the company was having financial difficulties, but says the first he heard of the possibility of bankruptcy came in Selfridge’s letter.
Several employees who were on layoff said they have yet to be paid from time before they were put on layoff.
“I had 63 hours I didn’t get paid for, for the time I worked before layoff,” Brennan said.
Ed Lennox, who worked in cabin and engineering for the company for three and a half years, said he was in a similar situation.
“They laid me off on the 14th (of June)” he said. “They should have paid me the next day, because they didn’t give me any return-to-work to date.”
Lennox said he has yet to be paid, and said that when he contacted the company, he was told they had filed for Chapter 11 and that he would not be seeing a check.
Brennan also contacted the company, concerned over health insurance and 401K contributions which had been withdrawn from his first June paycheck even though health insurance had been cut off at the end of May and the company was no longer contributing to employees’ 401Ks.
He said he was told by Selfridge that the company’s “hands were tied.”
After failing to get what he said were adequate answers to his questions, Brennan resigned his position.
“He had a month where money was coming into the company and was being used to fund operations,” Brennan said.
Selfridge’s hands are likely tied, at least to some degree.
AMCI Finance of Spokane, the company’s primary creditor, seized control of the company’s incoming mail and its corporate checking account on June 18.
Selfridge did not return a request for comment and the company’s primary contact rings to a busy signal this week.
Even though money was coming in, Maritime couldn’t stay out of the red.
The company struggled in 2010, bringing in $18 million in income. That number increased to $26 million in 2011 and the company had already matched its 2010 income with $18 million into June of 2012.
It wasn’t enough.
The company’s bankruptcy filing lists over $7 million in debt, including thousands of dollars owed to employees, and hundreds of thousands of dollars in trade debt owed to companies and individuals spanning the globe from Hood River to Italy.
Earlier this year came signs that things were beginning to unravel.
Chief Financial Officer Andre Young was terminated in January. He was followed out the door by President Charles Capovilla in March. Capovilla retains a 15 percent ownership of the company.
At the time of the filing Maritime had five pending breach of contract suits open against it; two in Oregon, two in Florida and one in the United Kingdom.
By the end of May health benefits were cut off, as were 401K matching funds. Dental benefits were cut off effective the end of March.
According to the bankruptcy filing, Selfridge supervised an updated inventory of company property, which would be needed for a bankruptcy filling, on June 5.
It was less than two weeks later, on June 18, that AMCI Finance of Spokane seized control of incoming mail and checks. The next day it seized control of the company’s corporate checking account.
At the time of the bankruptcy filing, Maritime’s financial assets included $28, 643.57 in its corporate checking account. One HSBC checking account listed $11,142.20 while another HSBC account was overdrawn by $36.
In that same period Maritime had a 2006 cargo van seized for lack of payment. The van is scheduled to be auctioned in August.
On June 26 Maritime Services filed for Chapter 11 in Oregon bankruptcy court.
Employees willing to speak on the record said they didn’t see the turn of events coming from a company which has made a name for itself with interior remodels on cruise ships, ferries and yachts around the world.
“It would have been nice to have honest answers about stuff,” Lennox said.
“We were never told they were going to be filing for bankruptcy” said Brennan.
In his letter to employees, Selfridge expressed hope that Maritime would be bought out of bankruptcy and allowed to continue its business.
“The take-home message here is that we tremendously appreciate the outstanding work you have done for MSC and we hope to keep you employed through this transition and to be able to reward you in the future when we are under new ownership,” Selfridge wrote.
“We will advise you of any major new developments. Thanks very much again for your ongoing loyalty and hard work. Rest assured that we are working our hardest to get you paid and stabilize your future employment.”