A federal judge has issued a decree compelling First Commonwealth Bank to comply with previously-agreed upon terms involving the sale of the bankrupt Dlubak Corp. to Grey Mountain Partners Fund II LP in September.
Judge Jeffrey A. Deller of the U.S. Bankruptcy Court of the Western District of Pennsylvania recently issued a motion forcing First Commonwealth Bank to pay Grey Mountain Partners $101,355.55 in funds the bank received from Dlubak Corp. accounts immediately following the September 23 auction in Pittsburgh of the company’s non-real estate assets.
Grey Mountain Partners, the Colorado-based equity firm that outlasted Secaucus, N.J.- based General Glass International (GGI) and Oran Safety Glass (OSG) with a bid of $3.25 million, will pay the remainder of Dlubak Corp.’s unpaid employee obligations, totaling $20,993. Per terms of the judge’s decree, Grey Mountain Partners will be entitled to offset its total unpaid employee obligations paid of $45,347.67 against past due, current and future lease payments, according to court records.
Brett Solomon, the Pittsburgh-based attorney for First Commonwealth Bank, declined comment when reached at his office on Wednesday morning. Efforts to reach representatives for either Grey Mountain Partners or Dlubak Corp. were unsuccessful.
The issue began following the September 25 closing of the sale of Dlubak Corp., the Blairsville, Pa.-based supplier of security glass and architectural flat and bent glass that had filed for Chapter 11 bankruptcy protection in August.
Grey Mountain Partners received a $15,572 credit against the sale purchase price based on post-auction, pre-closing accounts receivable collected by Dlubak Corp. It was only later that Grey Mountain Partners learned that Dlubak Corp. had actually collected $116,927.27 during that period, only for First Commonwealth Bank to pocket the more than $100,000 difference.
Additionally, Grey Mountain Partners learned that more than $45,000 in certain employee obligations had gone unpaid by First Commonwealth Bank.
Harry Readshaw, the Pittsburgh-based attorney for Grey Mountain Partners, called the bank’s decisions “bad faith actions in direct contravention to the sale order and the agreement to the parties,” according to court documents.
“First Commonwealth has exhibited a blatant disregard for the order of this court, the sale order and agreements it made in writing to Grey Mountain prior to and after closing,” Readshaw wrote in court papers. “Its actions are not only unsupportable, they are inexplicable.”
Solomon countered by stressing that his client did nothing unethical because the deal’s official closing came on September 25, and not on the September 23 date of the auction.
“There was still a possibility that the sale to GMP would not close,” Solomon wrote, according to court records. “Since the closing had not occurred on or before the close of business of September 25, 2013, [First Commonwealth Bank] swept the accounts receivable account on Monday, September 23, 2013, Tuesday, September 24, 2013 and Wednesday, September 25, 2013 as it did every day.
“There was nothing deceitful about [First Commonwealth Bank’s] actions in sweeping the accounts receivable account.”
Deller, however, felt otherwise.
As additional terms of the deal to purchase Dlubak Corp.’s non-real estate assets, Grey Mountain Partners had agreed to extend the contracts for Dlubak Corp.’s union employees for 90 days and to pay an additional $130,000 for all the accrued vacation for union members.
The sale of the company included equipment and inventory, books and records, all intellectual property rights, all products in development and all cash, cash equivalents and accounts receivables.
Grey Mountain Partners had earlier reached a tentative “stalking horse” agreement of $2 million with Dlubak Corp., only to watch GGI later eclipse that offer with a $2.2 million one of its own.
Dlubak Corp. listed more than 200 creditors, including seven that were owed at least $100,000, according to court records. Chicago-based Curbell Plastics was the biggest creditor, with Dlubak Corp. owing it more than $905,000.