- Law firms
- EYP has a $67.7 million lead bid from Ault Alliance
- Litigation, complex debt stack led to financial strain
(Reuters) - Architecture and design firm EYP Inc filed for bankruptcy on Sunday to sell its assets in the midst of litigation involving former shareholders and employees and after years of attempting to revamp its complicated debt obligations.
The Albany, New York-based company sought Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware with $149 million in debt. EYP has lined up a lead bid from private equity firm Ault Alliance Inc, its senior lender, to buy its assets for $67.7 million.
“EYP is a good candidate to use the protections that a Chapter 11 process provides,” interim CEO Kefalari Mason said in a statement.
EYP has offices in 11 cities across the U.S. and projects in approximately 100 countries. Its clients include public and private colleges, the federal government and medical centers, among others.
The company said that its business remained healthy during the COVID-19 pandemic. Mason said in a written declaration that the company’s recent financial trouble stems from complex debt obligations owed to several groups of creditors and lawsuits brought by former employees over EYP’s prior debt transactions and restructuring efforts.
One of the lawsuits accused a prior shareholder, Long Point Capital Inc, of duping employees into selling their equity in the company to an employee stock ownership plan in exchange for worthless notes. Though EYP itself is not a defendant in the case, it is on the hook for “significant” indemnification obligations to former directors, who were also defendants in the lawsuit, and Long Point.
The company has received millions of dollars in indemnification demands, most of which it has not been able to pay because it needs the money it has to continue business operations, Mason said in the declaration. Additionally, EYP spent years trying to restructure its debt without filing for bankruptcy, to no avail.
In addition to its cash and credit bid, Ault said it will offer to retain EYP’s 470 employees and assume the company’s real estate leases and contracts with consultants and trade vendors, according to court papers. Operations and work on projects are expected to continue through the sale process.
The case is In re EYP Group Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 22-10367.
For EYP: Craig Martin, Aaron Applebaum, Richard Chesley and Oksana Koltko Rosaluk of DLA Piper
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