Financially strapped online wine seller Vinfolio entered an “Assignment for the Benefit of Creditors” on Jan. 15. The process is a state-level insolvency proceeding that is an alternative for private companies to Chapters 7 or 11 in federal bankruptcy court.
According to an article on the web site of Robert L. “Bob”Eisenbach III, a partner in SF law firm Cooley Godward Kronish’s Bankruptcy & Restructuring group, most assignees are professional liquidators.
No assignee has yet been named in Vinfolio’s proceeding.
In addition, sources close to the process say they see value in the company and are working to find alternatives to outright liquidation.
In California, an assignment agreement does not require a court filing. While that costs less than federal bankruptcy and speeds the overall process it allows proceedings to avoid the transparency and public disclosures of a bankruptcy proceeding.
WEB STATEMENT FROM VINFOLIO CEO
The complete statement from Vinfolio CEO Steve Bachman is below:
After three years of very rapid growth — placing it among the top 15 fastest growing private companies in the SF Bay area from 2006 to 2008, Vinfolio experienced a much more difficult sales environment during 2009. A few weeks ago, we found ourselves in need of additional capital on a very near-term basis. The company investigated several options but new capital could not be obtained on a necessarily compressed timetable.
Because of the situation, and to safeguard the interests of our customers and creditors (including for wine purchases, wine sales, and wine stored with Vinfolio), the board of directors and the shareholders of Vinfolio approved and undertook a form of restructuring known as an Assignment for the Benefit of Creditors (the “Assignment”) on Friday evening, January 15, to provide the business with the flexibility to develop the appropriate course of action going forward.
The Assignment is being managed by a leading third party firm of experts in such assignments (the “Assignee”). It is important for you to know that key employees have been retained and our operations continue as we undertake this process.
Acquisition of Vinfolio Secured Debt
Also on Friday, January 15, a group including some of our significant customers acquired the secured debt of the company. This group is led by Jon Moramarco, The Managing Partner of BW 166 LLC. While the secured creditor cannot at this time officially speak for the business, they have given the following guidance to the Assignee for its operation of the Vinfolio business:
* According to Jon, “the Vinfolio business is a unique and valued asset to the community of wine collectors and wine enthusiasts. We want to see the business continue its mission and have acquired the secured debt to help align everyone’s (creditors’, customers’, employees’, users’) interest in this outcome.”
* The main value of the business is the goodwill of its customers and users. The secured creditor wishes to take actions where feasible to preserve the goodwill. Some of these include:
1. Commitments by the secured creditor group to fund the Vinfolio business in the near term while the Assignment process is ongoing.
2. Since January 1, 2010, the company has tracked funds from the sale of Marketplace and fixed priced auction items separate from other revenues. The secured creditor will waive any right to these funds and has asked that these funds be paid to the sellers in those sales as soon as practical.
3. During the Assignment process, this separation of funds and instructions from the secured creditor should continue.
4. The secured creditor has re-affirmed that they only have security in the assets owned by the company, and not in wines offered through the Marketplace or fixed price auctions, or wines stored by third parties with the business.
A personal word
Speaking as the founder of Vinfolio, I’d like to apologize to you for this unexpected development and ask our loyal customers and users to be patient during the Assignment. Your continued support will aid the Vinfolio business as we go forward.
I’m sure there will be many questions and we’ll try to provide answers through our Customer Service department (firstname.lastname@example.org).
Thank you for your continued support.