Receivership Used to Wind Down Business for $6 Million Pick-up

Jaco Environmental

Mill Creek, Washington

Challenge

Recycler of refrigerators and other energy-inefficient appliances. $50 million sales. $15 million debt. Contracted with all the major utilities providers across the USA to rebate purchases of energy efficient refrigerators. Locations in 28 states. 


  • The Company was experiencing liquidity issues caused by rapid expansion and increasing G&A costs.
  • Contractually required vendor payments were delinquent causing slow down on new business development.
  • Covenant defaults caused the company to enter into a lender forbearance agreement.
  • Consumer reimbursement payments became delinquent causing utility contracts to withhold payments.

Solution

  • MorrisAnderson discovered irregularities in rebate and other financial accounting.
  • MorrisAnderson was appointed State Receiver of the Company.
  • Determined the company was $3 million to $5 million delinquent on consumer rebate payments and as a result the business had to be shut down.
  • Performed a forensic analysis on rebate and other accounting to determine proper set-off adjustments for utility contracts and to pursue settlements on all contracts.
  • Shut down all 28 state processing centers all across the country, removed and sold assets and negotiated settlements with landlords to mitigate potential claims.
  • Handled consumer complaints and State District Attorney issues and resolved fraud claims.

Results

  • Able to settle all utility accounts and resolve contract deficiencies and collect residual accounts receivables.
  • Settled all lease holder claims and mitigated contingent environmental issues.
  • Compiled evidence and support for lenders claim against owners that resulted in a large settlement with the owners.
  • The Receivership returned a value of $6 million greater than estimated liquidation value for the secured lender.

Kyle Putzstuck

Kyle Putzstuck, CPA, is a Director at MorrisAnderson. Kyle brings an extensive background in the accounting and private equity industry and uses that background as basis to structure practical solutions through comprehensive financial analysis. Prior to joining Morris Anderson, Kyle held positions as the assistant controller for Z Capital Partners, a leading global alternative investment… Read More

Mark J. Welch

Mark J. Welch, CPA, CTP is a Principal at MorrisAnderson based in Pittsburgh. He has over 20 years in bankruptcy and restructuring experience especially in leadership roles and fiduciary positions with clients. Prior to joining MorrisAnderson, Mark was the Director of Internal Audit at Southern Air Transport, Inc., a mid-sized cargo air-transport airline. He also… Read More