Essex Technology Group, LLC has filed a motion to dismiss its Chapter 11 bankruptcy case after ceasing all business operations, proposing a structured exit that would transfer its remaining assets to secured creditors in exchange for payment of administrative expenses.
In a motion filed on June 4, 2025, with the U.S. Bankruptcy Court for the Middle District of Tennessee, the La Vergne, Tennessee-based company outlined a negotiated agreement between the debtor, its secured creditors, and the official committee of unsecured creditors that would avoid conversion to a Chapter 7 liquidation.
The company, which filed for bankruptcy protection on February 3, 2025, shut down substantially all business operations on February 28 after conducting court-approved going-out-of-business sales. The proposed dismissal represents "the culmination of productive negotiations" among the primary stakeholders, according to court documents.
"With the lien and claim position of the Debtor's secured creditors, it is clear that there is no realistic prospect for any material recovery for unsecured creditors," Essex stated in its motion. The company's bankruptcy strategy shifted to finding "the best possible exit" after operations ceased.
Under the proposed agreement, Essex would sell its remaining assets, including all potential avoidance actions under Chapter 5 of the Bankruptcy Code, to secured creditors ACON Equity Partners IV, L.P. and ACON BH Industries I, L.L.C. (collectively "ACON") in exchange for credit bids totaling $5 million against their secured claims. ACON has agreed to allow the use of its cash collateral to pay all allowed administrative claims, including claims under section 503(b)(9) of the Bankruptcy Code.
The proposed transaction includes ACON's agreement to automatically waive and release all Chapter 5 causes of action upon closing of the sale, effectively ending any potential preference actions against the company's creditors.
"This Motion is the culmination of productive negotiations by and among the primary constituencies in the Debtor's case," the filing states. "The Debtor determined that this path is fair to all creditors under the circumstances and is the most efficient way to wrap-up its affairs."
Essex owes approximately $9.97 million to the ACON entities on secured claims. The company also faces an estimated $58.6 million in unsecured claims, with additional rejected lease claims potentially worth between $20-30 million, bringing the total unsecured claims pool to between $85-95 million.
The motion argues that dismissal rather than conversion to Chapter 7 is in creditors' best interests, as a Chapter 7 proceeding would begin with no cash assets and the burden of unpaid Chapter 11 administrative expenses. In that scenario, a Chapter 7 trustee would be forced to pursue preference claims "simply to pay Chapter 7 administrative claims," creating what the company described as "professional fee churn."
Essex also noted that its analysis of potential preference actions showed limited recovery potential, with approximately 137 parties having an average exposure of only $27,000 each after accounting for defenses.
The official committee of unsecured creditors supports the dismissal motion after investigating potential claims and the secured creditors' liens. As part of the agreement, committee professionals' fees are capped at $850,000 collectively.
The court has set a deadline of June 25, 2025, for responses to the motion, with a hearing scheduled for July 1 if any responses are filed.
If approved, the dismissal would not take effect until the court rules on professionals' final fee applications and the sale to ACON closes. Essex has requested that all prior court orders remain in full force and effect despite the dismissal, to protect parties who previously acquired the company's assets.
Essex Technology Group is represented by Sean D. Malloy and Michael J. Kaczka of McDonald Hopkins LLC and David W. Houston IV and Charles E. Nugent of Burr & Forman LLP.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 19 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.