Pinnacle Fighting Attempt to Force Liquidation
Pinnacle Micro Inc., the long-troubled Irvine maker of optical storage devices, said a group of creditors is seeking to force the company into liquidation.
Pinnacle has been attempting to work out an acceptable out-of-court reorganization plan that would repay creditors.
If the liquidation effort proceeds, Pinnacle said, it would file for bankruptcy under Chapter 11 of the bankruptcy code, which would provide protection from creditors while the company attempts to reorganize.
“The company is vigorously contesting this,” said Robert E. Opera, Pinnacle’s bankruptcy attorney, referring to the liquidation petition. “Pinnacle Micro feels that there are no legitimate grounds for this action.”
The company, which has lost about $52 million since fiscal 1996, wants creditors to wait up to eight years for their money, according to sources.
Pinnacle officials declined to comment Thursday.
In a statement, Pinnacle said only 33% of its unsecured creditors have voted on the plan so far, but most have endorsed it. The company said it owes its unsecured creditors $17 million, and its secured creditors another $5.4 million, according to Pinnacle’s proposed reorganization plan.
Pinnacle extended the deadline to receive ballots to Sept. 22.
Under the plan, Pinnacle expects to pay claims by unsecured creditors with future cash flow over an eight-year period. But the company does not plan to pay interest on the debt, according to the release.
As part of its restructuring, the company has closed its Colorado Springs manufacturing plant, moved from its corporate offices in Irvine to a smaller space in the same city, and cut its staff from 106 to 26.
Clifton R. Huxford of Beverly Hills, one of the creditors who signed the involuntary bankruptcy petition, said he doesn’t trust Pinnacle’s proposal.
“If I sat and did nothing, I’ll probably never see my money,” said Huxford, who says he is owed nearly $96,000 in consulting fees.
Two others also signed the petition. William Pat Price of Fountain Valley, a former employee, claims the company owes him $70,000 in severance pay. Keiji Murayama of Tokyo claims Pinnacle owes him $50,000 in consulting fees.
The company insists that--if forced to sell its assets--it won’t be able to raise enough money to pay all of its creditors. Its assets would only be worth about $1.9 million if it were forced to liquidate, the company said.
A hearing is scheduled Oct. 21 at the U.S. Bankruptcy Court in Santa Ana.
