An Unexpected Texas Business Now Files For Bankruptcy

July 3, 2024

An unexpected Texas business now files for bankruptcy for the second time in two months after submitting a petition a day before foreclosure.

Picosa Creek LLC has filed for Chapter 11 bankruptcy for the second time in less than two months.

The owner of the 5,100-acre South Texas ranch, located near Eagle Pass, submitted the petition on Monday, a day before a scheduled foreclosure auction by First State Bank of Uvalde, which is owed over $9 million on a mortgage loan issued in 2022.

The ranch is led by East Texas bank owner Brandon T. Steele, who is grappling with significant financial challenges, including a $30 million judgment against him from Texas Capital Bank, based in Dallas.

Steele’s financial troubles have compounded over the years, impacting his business ventures and political contributions.

The first bankruptcy case was dismissed by U.S. Bankruptcy Judge Michael Parker, who found it to be filed in “bad faith” as it primarily aimed to delay the foreclosure rather than reorganize the business.

However, Parker dismissed the case “without prejudice,” allowing Picosa Creek to refile for bankruptcy.

Steele openly acknowledged his financial struggles during a hearing in the San Antonio courtroom on May 29.

“I make no secret that I’ve had financial difficulties over the last several years that I’m working through,” said Steele.

His financial woes have also led to a cessation of his frequent political donations to prominent Republican figures such as Governor Greg Abbott, Attorney General Ken Paxton, and Land Commissioner George P. Bush, with the contributions stopping after 2018, per Express News.

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An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.

Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.

Supply Source brands include The Safety Zone and Impact Products.

The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.

Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.

Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products

The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.

However, the company’s financial performance deteriorated in subsequent years.

Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.

The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.

In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.

Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.

The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.

The excess inventory forced the debtor to secure additional storage space, which increased storage costs.

These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.

The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.

The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.

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Also Read: This Massive Mall Retailer Is Now Closing In California

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