Paragon Industries, Inc., an Oklahoma steel pipe manufacturer, filed an amended disclosure statement on January 13, 2026, outlining a Chapter 11 liquidation plan that would establish a trust to wind down operations and distribute proceeds to creditors facing claims totaling more than $370 million. The company's official creditors' committee challenges a $77.7 million secured claim held by a trust controlled by the company's former director and president, who was indicted on wire fraud charges on October 30, 2025.
The 156-page First Amended Disclosure Statement, filed with the United States Bankruptcy Court for the Eastern District of Oklahoma under case number 25-80433-PRT, details a steel manufacturer that employed over 400 people and generated more than $300 million in revenue as recently as 2023. By 2025, the company retained only approximately 70 employees while revenue declined to under $55 million. Phillips Murrah P.C., serving as bankruptcy counsel to the debtor, represents Paragon Industries in the restructuring.
Company Background and Operations
Paragon Industries was formed in 1983 as an Oklahoma corporation headquartered in Sapulpa, where it operated its primary manufacturing facility on approximately 84 acres of company-owned property. The company manufactured high-quality steel pipe with API certification and leased space at the Port of Muskogee for a slitting facility with rail and barge access.
Events Leading to Bankruptcy
The company expanded operations to a leased facility in Stephenville, Texas. The Texas facility could only partially produce casing pipe, requiring third-party finishing work. Quality control issues with the third-party finisher resulted in inferior pipe being sold to customers, according to the disclosure statement. The defective pipes failed in several wells, and large claims were filed against Paragon. The company's primary distributor ceased its business relationship, causing a substantial revenue loss. The company closed the Texas facility, shut down Sapulpa operations, and terminated most of its employees.
Multiple lawsuits were filed against the company. On March 13, 2025, a state court in the case Byline Bank v. Paragon Industries Inc. appointed a temporary receiver over the debtor. On May 21, 2025, Paragon Industries filed for Chapter 11 bankruptcy protection with the stated goal of conducting a sale of assets and using proceeds to pay creditors.
Ownership Structure and Claims
The disclosure statement describes the ownership structure. Paragon Industries is wholly owned by Paragon Intermediate Holdings, Inc., a Delaware corporation, which is in turn owned by Paragon Holdco, Inc. The ultimate ownership rests with LEP Paragon Holdings, LLC, holding approximately 60 percent, and the Wachob Irrevocable Trust, holding approximately 40 percent.
The bankruptcy estate faces claims totaling over $370 million across multiple categories. Administrative expense claims are estimated at $4 million to $8 million. Secured claims total $132.3 million, including an $18.9 million claim by Byline Bank and the contested $77.7 million claim held by the Wachob Irrevocable Trust. Priority claims amount to approximately $4.1 million, while general unsecured claims total $238.3 million.
The Contested Trust Claim
The official committee of unsecured creditors has raised concerns about the validity of the Wachob Irrevocable Trust claim, which arose from a Secured Promissory Note executed on or about December 18, 2020. According to the disclosure statement, the committee has identified suspicious patterns of daily funds transfers between the debtor, the Wachob Irrevocable Trust, and other Wachob-controlled entities, with no identifiable benefit to Paragon Industries from these transactions.
Criminal Indictment of Former Executive
The former director, president, and trustee of the Wachob Irrevocable Trust was indicted on wire fraud charges on October 30, 2025. The disclosure statement notes that the committee continues to investigate whether there are additional facts and circumstances that may have substantially contributed to the company's bankruptcy.
The disclosure statement indicates that if the committee's challenge to the Wachob Irrevocable Trust claim succeeds, subordination of the claim could increase funds available for distribution to unsecured creditors by approximately $77.7 million. The company acknowledges it holds potential causes of action related to prepetition actions taken by the trust or related entities and persons.
Proposed Liquidation Trust Structure
The proposed Chapter 11 plan calls for the creation of a liquidation trust to administer the debtor's remaining assets and distribute proceeds to creditors. On the plan's effective date, all of the debtor's assets would transfer to the liquidation trust, which would be managed by a liquidation trustee selected by the creditors' committee. A liquidation trust oversight committee would provide additional governance.
The plan divides claims and interests into six classes. Class 1 consists of the Byline Bank claim, which is impaired and entitled to vote on the plan. Byline Bank would receive payment from asset sale proceeds pursuant to a negotiated resolution. Class 2 covers other secured claims, which are unimpaired and deemed to accept the plan, with holders receiving payment in full. Class 3 includes other priority claims, also unimpaired and receiving full payment.
Class 4, comprising general unsecured claims, is impaired and entitled to vote. These creditors would receive a pro rata share of distributable proceeds after payment of administrative expenses, secured claims, and priority claims. Class 5 consists of equity interests in Paragon Industries, which would be cancelled and released, with interest holders conclusively deemed to have rejected the plan. Class 6 includes subordinated claims, also deemed to have rejected the plan.
Plan Support Agreement and Byline Bank Settlement
The path to the current plan involved negotiations following motions to dismiss the case and appoint a Chapter 11 trustee. On September 5, 2025, the debtor and creditors' committee executed a Plan Support Agreement, which the bankruptcy court approved on September 10, 2025. Key terms of the agreement included the former director and officer's resignation, the appointment of an independent director, expanded authority for the Chief Restructuring Officer, and a commitment to advance the plan and conduct an asset sale process.
The Plan Support Agreement also resolved Byline Bank's claim, establishing an allowed claim of $18.9 million. Under the agreement, Byline Bank is deemed oversecured with respect to a property parcel designated as Tract 1. For another property parcel called Tract 2, the agreement allocates 30 percent of sale proceeds to Byline Bank and 70 percent to general unsecured creditors. The disclosure statement notes that if general unsecured creditors receive distributions from Tract 2 proceeds, they would be entitled to an equivalent percentage of recovery from other sources, but not to exceed 100 percent of their claims.
Professional Appointments and Asset Sales
Since the petition date, the court has authorized the retention of several professionals to assist in the restructuring. In addition to Phillips Murrah P.C. as bankruptcy counsel, the debtor retained a Chief Restructuring Officer and an investment banker. The court also ratified the appointment of an independent director.
The disclosure statement indicates that since the petition date, the debtor has engaged in ordinary course sales of inventory. The current estimated inventory value reflects these post-petition sales. A bid procedures order was entered on November 25, 2025, establishing processes for marketing and selling the debtor's remaining assets.
Voting Process and Confirmation Requirements
The bar date for non-governmental entities to file proofs of claim was November 19, 2025, while governmental units have until February 4, 2026. The disclosure statement provides that ballots for acceptance or rejection of the plan must be received by 5:00 p.m. Central time on a date to be established by the court. A confirmation hearing date will also be set by the court to determine whether the plan has been accepted by the requisite number of claimants and whether other confirmation requirements have been satisfied.
Under bankruptcy law, the plan requires acceptance by at least one class of impaired claims. To be accepted by a class, the plan must receive votes from creditors holding at least two-thirds in amount and more than one-half in number of claims actually voting in that class. However, even if one or more classes reject the plan, the court may still confirm it under the cramdown provisions if the plan does not discriminate unfairly and is fair and equitable with respect to rejecting classes.
Best Interests Analysis and Risk Factors
The disclosure statement states that the plan provides maximum recoveries to creditors compared to alternatives. A hypothetical Chapter 7 liquidation would likely result in lower recoveries due to additional administrative costs, delays, and the appointment of a Chapter 7 trustee entitled to fees. The disclosure statement states that reorganization is impractical given the operational issues that led to the bankruptcy filing and that alternative Chapter 11 plans proposed by other parties would likely be substantially similar to the current plan.
The document identifies several risk factors that could affect distributions under the plan. These include uncertainty regarding the amount and timing of distributions, potential modifications to the plan, solicitation requirements, ongoing litigation, and possible delays in appointing the liquidation trustee. The plan includes releases, injunctions, and exculpation provisions that could face objections and may not be approved by the court.
The debtor releases in the plan exclude non-released claims, specifically including claims related to the Wachob Irrevocable Trust loan. This preservation of claims allows the liquidation trustee to pursue potential recoveries that could benefit unsecured creditors.
Ongoing Committee Investigation
The disclosure statement states that the creditors' committee has advised the debtor it has concerns about the completeness of documents and information produced to date. The committee continues to investigate whether there are additional facts and circumstances beyond the quality control issues at the Texas facility that may have substantially contributed to the bankruptcy. The establishment of the liquidation trust with a trustee selected by the committee would facilitate ongoing investigation and potential prosecution of claims.
The United States Trustee appointed the initial creditors' committee on June 11, 2025, and appointed a reconstituted committee on July 16, 2025. The committee negotiated the Plan Support Agreement, challenged the Wachob Irrevocable Trust claim, and worked to ensure preservation of potential causes of action for the benefit of the estate.
The resolution of the contested Wachob Irrevocable Trust claim represents a factor that could impact recoveries for the company's unsecured creditors. The bankruptcy case number is 25-80433-PRT in the United States Bankruptcy Court for the Eastern District of Oklahoma. Phillips Murrah P.C. serves as bankruptcy counsel to the debtor.
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 156 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.