LMI Leaders Respond to Receivership
It has been a tough time for LMI Solutions over the past few years and being put into receivership this week is yet another challenge for this large US cartridge remanufacturer.
LMI has survived tough times before, including a fire in its production facility in 2017. Just 12 months ago LMI’s rebirth began when it partnered with Turnspire Capital Partners LLC.
Gary Willert (pictured) has been at the helm since he acquired the company in 1997 but sales have continued to dwindle, thanks to strong competition from Clover Technologies and more recently, and—as cited in the receivership documents to the Arizona Superior Court—the new business relationship between HP and Xerox.
According to the same court documents, LMI was permitted to loans up to US$14 million and at the time of the filing had US$5,659,592 owing on the credit agreement. It appears the bank providing the loan through the creditor had wanted its outstanding obligation to be paid immediately, which caused the need to file for receivership.
May Not Be Sustainable
Those providing the finance were obviously concerned about a phone call on June 12, 2019, where LMI advised its financial partners that continuing operations “may not be sustainable. They cited the June 2019 business relationship between Xerox Corporation and HP Inc “whereby dealers in the Xerox Business Solutions network would be mandated to use only HP Products. Members of the Xerox business network included Chicago Office Technologies Group, [LMI’s] single largest customer.”
While many in the fiercely competitive US market see this as the “last nail in the coffin” for LMI, the Willert family see otherwise. Willert’s daughter Annie Willert, LMI’s Vice President of Sales and Marketing was featured on the cover of RT ImagingWorld magazine a few months ago. She has come out defending the action to go into receivership. “Along with the rest of the LMI management team,” she says. “I truly see this as the best thing to ensure LMI’s future state in the industry.” She added receivership is a step in which a trustee is legally appointed to act as the custodian of a company’s assets or business operations to avoid bankruptcy. “Our private equity partners have decided to exit the industry, thus putting us in a position to sell their equity. The bank has required an investment banker to advise on a sale process – thus the receivership,” Willert explains.
MCA Financial Group, Ltd., acting by and through Morris C. Aaron, has been appointed the receiver in this action, effective immediately. LMI, “its agents, employees, managers, members, directors, partners, representatives, and affiliates must immediately turn over to the Receiver sole possession, custody, and control of the Collateral.” This includes “the Borrowers’ records, books of account, ledgers and all business records,” contracts, leases, tax identification numbers and “immediate and unlimited access to and full use of any real property interests.”
The court documents also clearly state that LMI, the “Borrowers and their agents, employees, managers, members, directors, partners, representatives, and affiliates, must not: interfere with the Receiver, directly or indirectly, in the management, operation, and disposition of the collateral or … do any act that will, or may tend to, impair, defeat, divert, prevent, or prejudice the preservation of the collateral or Plaintiff’s interest in the collateral.”
You can read the “Phoenix Rising” story of LMI that has continued to bounce back despite the challenges thrown at it.
What Do You Think?
What is your response to how LMI leaders respond to receivership? What do you expect will happen next?