A popular restaurant chain now files an unexpected bankruptcy in Texas amid a bitter dispute between its majority owner and founder.
The majority owner of Sushi Zushi has filed for Chapter 11 bankruptcy protection amid an ongoing feud with the San Antonio restaurant chain’s founder.
A lawyer for Sushi Zushi of Texas Inc. said in a court filing Friday that it can’t meet its financial obligations due to legal costs, expenses associated with restaurant closures and high-interest loans it obtained to fund shortfalls.
Sushi Zushi had hired an investment bank to explore options for the chain, including a possible sale, but the lawyer said a lawsuit brought by chain founder Alfonso Tomita ended all discussions and any letters of intent the company had in place.
Tomita’s Strategenic Management LLC has accused managers he brought in to operate the chain of misappropriating millions of dollars from the business.
The lawsuit, filed in December, names Sushi Zushi of Texas, Alamo SZ LLC and its controlling principal, Jason Kemp, as defendants.
Alamo SZ owns 82% of the debtor, while Strategenic owns the remaining 18%.
In late March, Sushi Zushi of Texas filed its own lawsuit against Tomita.
It has alleged that he continued to receive pay after his employment ended in March. It seeks to collect more than $250,000, but no more than $1 million, from him.
Sushi Zushi had seven locations but is down to three.
Its bankruptcy reported $736,409 in assets and $3.9 million in liabilities as of late last year.
Among the largest unsecured creditors listed in the bankruptcy petition are Coppell-based Asian food distributor JFC International, which is owed about $302,500, and Sysco Central Texas Inc. of New Braunfels, owed about $248,500.
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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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