Over the past week, two related companies, MicroBilt Corporation and CL Verify, LLC, filed chapter 11 petitions in a bankruptcy court in New Jersey (MicroBilt on March 18, 2011 and CL Verify six days later). The companies, headquartered in Princeton, New Jersey, describe themselves as “leader[s] in risk management information for small and medium-sized businesses and leading provider[s] of alternative data for non-traditional lenders.” Specifically, MicroBilt offers small and medium sized businesses with “online access to consumer and commercial credit bureau data with automated decisioning and collection services,” as well as “proprietary comparative private-company financial information with its ‘Integra Data’ on more than 4.5 million privately held companies collected from 32 governmental and non-governmental sources along with analytic tools.”
The companies employ approximately 77 people in six states and generated 2010 revenues of approximately $20 million. Court filings state that the companies, which have approximately $8.4 million in unsecured debt and no secured debt, believe that they have an enterprise value of $150-180 million. They also have a number of additional subsidiaries and affiliated companies, but no other legal entities were included in the bankruptcy filings.
The companies state in court filings that the chapter 11 cases were filed in response to recent developments in their long-running dispute with Fidelity National Information Services, Inc., d/b/a Chex Systems, Inc. The dispute began in 2008 when Chex Systems “unilaterally terminated its contract with MicroBilt” as a result of a dispute. That dispute was resolved through arbitration and resulted in a June 2009 memorandum of understanding and an August 2009 resale agreement (which was subsequently amended in January 2010). However, when MicroBilt acquired CL Verify, new disputes between the companies and Chex arose resulting in new litigation in federal district court in Florida and, after Chex attempted to “wrongfully terminate” (quoting MicroBilt’s bankruptcy court filings; obviously, Chex would have a very different perspective on the grounds for termination) the 2009 resale agreement, in state and federal courts in New Jersey. MicroBilt sought a temporary restraining order in New Jersey federal court, but the request was denied. Chex then informed MicroBilt that it intended to terminate the resale agreement effective March 20, 2011. After receiving notice of the pending termination on March 18th, MicroBilt filed the initial chapter 11 case to prevent Chex from terminating the contract.
Pursuant to the disputed agreements, MicroBilt purchases information from Chex which it then resells to MicroBilt and CL Verify’s end customers. According to MicroBilt’s pleadings, termination of the agreement would be “devastating” to the debtors’ businesses. Specifically, MicroBilt states that, if the agreement is terminated, it “will lose a substantial customer base because the customers to whom it resells Information comprise 58% of its business . . . and there is no replacement vendor from whom the Debtor can feasibly purchase the same Information it purchases from Chex.”
MicroBilt and CL Verify are represented in the chapter 11 cases by the law firm of Lowenstein Sandler PC.
- Chapter 11 Voluntary Petition of MicroBilt Corp.
- 20 Largest Unsecured Creditors filed by Jeffrey A. Kramer on behalf of MicroBilt Corporation
- Declaration of Walter Wojciechowski in Support of Chapter 11 Petition and First Day Pleadings
- Motion re: for an Order Pursuant to 11 U.S.C. §§ 105(A), 363(C), 345(B), 1107 and 1108 (I) Authorizing the Debtor to Continue and Maintain its Existing Cash Management System, Bank Accounts and Business Forms, (II) Modifying the Investment Guidelines Set Forth in 11 U.S.C. § 345, And (III) Granting Related Relief Filed by Kenneth Rosen on behalf of MicroBilt Corporation
- Motion re: for an Order Pursuant to 11 U.S.C. §§ 105(A), 363(B) And 507(A) (I) Authorizing the Debtor to Pay Prepetition Wages and Salaries and Related Obligations and Taxes and (II) Directing all Banks to Honor Checks and Transfers for Payment of Prepetition Employee Obligations Filed by Kenneth Rosen on behalf of MicroBilt Corporation. (Attachments: # 1 Proposed Order)
- Motion re: for Entry of an Interim Order and a Final Order (I) Prohibiting Utility Companies from Discontinuing, Altering or Refusing Service on Account of Prepetition Invoices, (II) Deeming Utility Companies to Have Adequate Assurance of Future Payment, and (III) Establishing Procedures for Resolving Requests for Additional Assurance Pursuant to 11 U.S.C. §§ 105(A) and 366 Filed by Kenneth Rosen on behalf of MicroBilt Corporation. (Attachments: # 1 Exhibit A – Interim Utilities Order# 2 Exhibit B – Final Utilities Order# 3Exhibit C – List of Utility Companies)