Lumenyte Files for Chapter 11 in Bid to Stop Liquidation

Lumenyte International Corp., which has its futuristic fiber-optic lighting cable in Las Vegas casinos, museums, high-rises and neighborhood yards, has sought bankruptcy protection to prevent its main creditor from seizing its assets.

The Irvine lighting company said Tuesday that it filed a Chapter 11 petition to reorganize its debts after the lender, Imperial Bank, called its loan due, demanded immediate repayment of $1.7 million and sought to appoint a receiver over Lumenyte.

“We filed the Chapter 11 to stave off the bank so it couldn’t come in and liquidate a company that’s operating profitably,” said John Robbins, Lumenyte’s president.

Peter Csato, a lawyer for Imperial Bank, declined to comment.

Imperial Bank started taking action last year after determining that Lumenyte had defaulted on a loan term by allowing its net worth--assets minus liabilities--to dip below $2.8 million.

The bank’s action, Robbins said, hurt the company’s reputation with both customers and suppliers, resulting in falling sales and cash flow problems, he said.

A tiny player in the world’s $25-billion lighting industry, Lumenyte introduced fiber-optics illumination for swimming pools, spas and fountains in the early 1980s. Its products, strands of light in cables like fire hoses, are more energy efficient and safer than traditional lights, according to the company.

Its fiber-optic cable, Robbins said, is used to help light such structures as Harrah’s Casino in Las Vegas, the San Francisco Public Library and the Getty Museum in Brentwood.

Lumenyte’s bankruptcy filing in Santa Ana listed $8.4 million in assets and $2.8 million in liabilities, including about $1 million to 250 unsecured creditors.

The privately held company, which has 70 employees, earned $300,000 last year on sales of $7.5 million, said Lumenyte’s bankruptcy attorney, Evan D. Smiley.

“This is a company that never should have been forced into Chapter 11,” Smiley said. “It’s a healthy business that’s making money.”

Robbins said he expects to emerge from bankruptcy quickly. He said he recently asked the bank to give Lumenyte a few more weeks to raise enough money to pay off the loan, but Imperial Bank refused.

The company experienced other difficulties last year. In January, it laid off about 20% of the work force because of mounting loses, Robbins said. Another round of layoffs followed a few months later. The company was making interest-only payments on its loan.

Even so, he contends, Imperial undervalued the company’s net worth, needlessly declared the loan in default and eventually forced it into bankruptcy.

After learning of Lumenyte’s default, suppliers began demanding immediate payment, which prevented the company from making purchases and slowed production, Robbins said.

As revenue fell, the bank called the loan due in September, but the company could not make the lump-sum payment. The bank sued, asking the court to appoint a receiver. A hearing was scheduled for last Thursday, but Lumenyte filed its petition in U.S. Bankruptcy Court last week, halting the state court action.

Lumenyte teetered on the verge of collapse once before. In 1992, top officers worked for 10 months with no pay to keep the business afloat, living on credit cards, savings and loans from family members.