Updated: Creditors look to force Live Well Financial into bankruptcy

The last day for many Live Well employees was May 3rd.

Three sizable creditors of collapsed local lender Live Well Financial are attempting to force the Chesterfield-based firm into bankruptcy liquidation as they seek to recoup more than $130 million.

Flagstar Bank, Mirae Asset Securities, and Industrial and Commercial Bank of China Financial Services filed an involuntary bankruptcy petition against Live Well on Monday in Delaware federal court, as they push to have a judge there put the company into Chapter 7 in order to search for and liquidate its remaining assets.

Flagstar, which is already suing Live Well and founder Michael Hild in Michigan, claims it is owed at least $69 million on lines of credit it loaned the company to help fund its mortgage business.

Industrial and Commercial Bank of China and Mirae claim they are owed at least $40 million and $22 million, respectively, for securities agreements. Live Well was in the business of selling bundles of reverse mortgage into the secondary securities market.

All three creditors claim Live Well is in default of their respective agreements.

Involuntary bankruptcy filings are typically made by creditors of a company to have a judge determine whether bankruptcy is warranted. The company would then have a chance to argue its case. If the judge agrees with the initial petition, a trustee would likely then be appointed to determine the state of the company’s assets, preserve them and potentially liquidate them to dredge up funds for creditors.

Michael Hild

The filing comes about a month after Live Well abruptly shut its doors and laid off its workforce of more than 100 with apparently little notice. The company had been among the Richmond region’s fastest growing companies in years past.

A possible bankruptcy filing could speed up the process of answering the question of what exactly caused Live Well’s collapse.

Live Well, in a letter to the Virginia Employment Commission upon shutting down on May 3, stated only that “due to sudden and unexpected developments in the markets for certain financial assets the company uses as collateral or certain credit facilities that provide this liquidity, these lenders have reduced significantly the amount of liquidity they make available to the company.”

Affidavits included in the bankruptcy filing show the three creditors themselves are still searching for answers.

The creditors state they “attempted numerous times to engage the debtor in connection with its abrupt wind down and failure to pay its outstanding obligations… These efforts have been to no avail.”

They argue that Live Well is insolvent and not paying its debts as they come due, and that a “coordinated, controlled, court-supervised liquidation” through bankruptcy is the best alternative for the company’s creditors.

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Brett A HunnicuttDan WarnerEd Christina Recent comment authors
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Ed Christina
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Does anyone have any guesses as to why this collapse was so sudden? Between them and Colortree, I wonder if the economy in Richmond is on thin ice?

Dan Warner
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Dan Warner

I imagine the most likely reasons would be:
1. Personal reasons that have yet to be reported on
2. First signs of the credit crunch that the bear analysts have been warning of for months now
3. Bad bets made on expectations of future investments/business that did not materialize
4. Some combination of the above

If I had to wager I’d guess 1 or 2, but I’m waiting on RBS for the correct answer.

Brett A Hunnicutt
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Brett A Hunnicutt

Now who will bring back Meat Juice?