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New York Bankruptcy Litigation Developments in Bankruptcy Law within the State of New York and the Second Circuit

Personal Communications Devices, LLC Files for Bankruptcy in the EDNY

Posted in Debtor Filings

Introduction

On August 19, 2013, Personal Communications Devices, LLC and its holding company (collectively “PCD”, or the “Debtors”) filed a chapter 11 petition for bankruptcy with the United States Bankruptcy Court for the Eastern District of New York.  According to the Declaration of Raymond F. Kunzman, PCD’s Chief Executive Officer, PCD is a leading distributor of wireless communication devices and accessories, as well as a provider of value-added services to wireless device manufacturers and wireless telecom carriers.  PCD began distributing mobile devices in 1984 as a part of Audiovox Corporation.  In July 2008, a group of investors led by PineBridge Investments purchased PCD.

Events Leading to PCD’s Bankruptcy

In 2012, PCD generated $1.6 billion in revenue, but suffered losses of $16.9 million on a normalized basis.  According to the Declaration, as of the Petition Date, PCD secured indebtedness of approximately $107 million, of which over $35 million is secured by a first priority lien.  The remaining secured indebtedness is secured by a second priority lien.

The Declaration cites to a shift in the demand towards smartphones in the mobile industry, through which profits have been consolidated amongst fewer and fewer manufacturers, such as Apple and Samsung.  Accordingly, non-premium handset manufacturers have been adversely impacted, and as a result has diminished the profitability of PCD, which is a supplier of non-premium and niche handsets and wireless devices.

PCD’s Objectives in Bankruptcy

Through this bankruptcy action, PCD seeks to sell substantially all of its assets.  In February 2013, PCD’s board of directors authorized the retention of BG Strategic Advisors, LLC to explore the possibility of such a sale.   On June 24, 2013, a stalking horse bidder emerged, Quality One Wireless, LLC, which signed a letter of intent with the Debtors to purchase substantially all of their assets, and on August 19, 2013, an asset purchase agreement was signed (the “Stalking Horse APA”).  According to the declaration, the Stalking Horse APA establishes a firm offer for the purchase of the Debtors’ assets, but remains subject to higher and better offers through the auction process of this chapter 11 bankruptcy case.

General Information

According to the Petition, PCD’s estimated assets are valued at $1 million to $10 million.  The Debtors are represented by the law firm of Goodwin Proctor LLP, and the Judge assigned is the Honorable Alan S. Trust.  The case is proceeding under case number 13-74303 in the Eastern District of New York.

In addition, the Section 341 Meeting of Creditors has been scheduled to take place on September 20, 2013 at 10:00 a.m. in Room 562 of the Central Islip Federal Courthouse, which is located at 560 Federal Plaza, Central Islip, New York.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in the States of New York and Delaware and practices before the United States Bankruptcy Courts  in those jurisdictions.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.