Online triathalon retailer Trisports.com, which is headquartered in Tucson, filed for Chapter 11 bankruptcy protection earlier this month.
The company filed for the protection on June 14, 2013 when they were unable to restructure two loans in the total amount of $1.77 million from Bank of the West.
Trisports.com founder and CEO Seton Claggett told TucsonVelo that the loans, which were taken out in June and October 2011 were used to purchase the store’s solar panels and implement a new software system for the mail-order business. The loans were secured by the company’s assets.
Claggett said they were 5-year loans in which the first year was interest-only payments. Claggett said when the loans switched to principal plus interest payments in October of 2012, Bank of the West decided to call the loans due.
“The most frustrating thing is we still don’t know why the bank called the loans,” Claggett said.
According to court documents filed by Trisports.com’s attorneys, the loans matured on Oct. 15, 2012 and in March 2013 Bank of the West filed a suit in Pima County Superior Court demanding payment and asking for control of the company’s assets based on the loans’ terms asserting it was owed $1.77 million.
Claggett said the company tried to work with the bank to negotiate terms for repayment but the bank wouldn’t accept the company’s plan to repay the loans. Trisports decided to file for bankruptcy protection to prevent the bank from dismantling the company by selling off its asetts.
Court documents indicate that the company estimates the retail value of the company’s assets to be $3.7 million. According to the documents, Trisports asserts that if the bank takes over the assets it would essentially ruin the business and prevent repayment to many of the other companies to which Trisports.com owes money.
A list of the company’s suppliers indicated Trisports.com owes about $1.5 million to its top 20 suppliers and service providers.
Claggett said all but two of their hundreds of suppliers are continuing to do business with them during the reorganization.
Claggett said the business is still healthy and they filed for protection to prevent Bank of the West from taking control of the firm’s assets and to use the court to work out a repayment plan.
In the filings Trisports listed several setbacks to their business and expansion goals.
The documents indicate the new ordering software had many glitches and ended up costing the firm $500,000 in lost sales.
Additionally, the company spent more than $750,000 to expand a physical store to Tempe which hadn’t started making money. The Tempe store was closed in May. Clagett said the decision to close the store was made to show the courts that the company was working to reduce its costs and save money.
The filing also lists lost sales from other online retailers like Amazon.com. According to court documents, all but two of their suppliers have put products on Amazon and surveys indicate Amazon has increased its market share while TriSports.com’s market share has fallen.
The document indicates revenue is down 21 percent compared to the same time in 2012.
According to the bankruptcy filing, the company plans to use the protection to reorganize and reset.
“TriSports.com filed this reorganization case to restructure its obligations through a plan of reorganization, implement cost cutting and other operational changes to reset the business on a sustainable path for growth, including important new initiatives to better exploit its customer lists, to implement multi-channel marketing and to begin selling through the Amazon and E-Bay channels.”
In a letter sent to suppliers, Claggett wrote that the bank’s decision to demand repayment and the economic downturn hurt the company’s growth. The letter also questioned why the bank called the loan.
“The down-turn in the economy greatly affected our business, and unfortunately, the investments we made to implement several key growth initiatives last year were undermined by Bank of the West’s decision to cancel our line of credit and call our equipment loan. We believe Bank of the West’s actions were in response to bank regulatory requirements rather than specific concerns about our business, as we were current on our debt service obligations at the time they called the loans due. Filing the voluntary petition was a “last resort” as we made many attempts to negotiate a reasonable solution with Bank of the West; unfortunately, we were not able to do so, and so we made the difficult decision to file the voluntary petition in order to use the power of the Court to accomplish what we were not able to accomplish working directly with Bank of the West.”
Claggett wrote in the letter that during the reorganization Trisports.com will remain open and continue supplying triathletes.
“Using the powers of the Bankruptcy Court, we will be able to restructure our obligations to Bank of the West and vendors that will facilitate the investment of new capital into TriSports.com that will preserve jobs, ensure the payment of future payrolls, honor our commitments to our customers, and continue our growth.
Operations at TriSports.com will continue without interruption throughout the term of the reorganization.”
Claggett said TriSports.com will continue operating normally and will continue to be a part of the Tucson community.
“We think we’ve done a lot of good things for the Tucson community and we will continue to do so as we work our way through this,” Claggett said.