Posted
Dippin' Dots is several million dollars in debt after years of lawsuits and countersuits. Jones says although his company has millions of dollars in assets, the bank can foreclose on it at any time. Rivals have successfully sued Jones for filing an invalid patent. The company is about to take a similar colder-than-cold instant-freezing process that makes Dippin' Dots so delectable and redirect that technology to fresh brewed coffee.
Read more and see video from USA Today.
The company says that they have $20 million in assets and $12 million in debt ($10 million owing to the bank). How liquid are those assets? How much of those assets either would be difficult to sell or have little, if any, value on the market?
It is not uncommon for companies and their lenders to have differences of opinion with respect to the future of the company. Sometimes the lender may not be comfortable with the credit. Sometimes the bank determines that it doesn't want to lend as much money to companies in the given industry (or may want out of the industry entirely). Loan documents typically allow lender to accelerate the loan if there is a default. In most cases, a default does not result in a foreclosure. But it does bring the parties to the table to talk about what is happening with the company and expectations going forward. And sometimes its the company that determines it wants to go a different direction with a new lender.
If most cases where there are problems with the company/lender relationship, the company refinances with another lender. If the company's financial position is such that it cannot find another lender, the parties are stuck with each other. At least for a while. The parties can keep trudging along hoping either the financials improve or another lender is found. If neither happens, the bank may try to force the issue with a bankruptcy. In this case, sounds like the bank isn't at great risk of losing any money. But they may be concerned that won't be the case for much longer. Company assets may be worth less and its liabilities higher relatively quickly. The bank may also have lost any confidence that the company knows how to resolve its current situation.
Bankrutpcy will be a very expensive process.
You must be logged in to post