Not long after, one of Live Well’s creditors, Flagstar Bancorp, revealed in a filing with the Securities and Exchange Commission that the defunct lender still owes the bank $74 million. It pledged to “pursue all available sources of collection” to get its money back, including legal remedies.
Now, it appears Flagstar is making good on that promise, teaming with two other Live Well creditors to push the lender into involuntary bankruptcy.
Last week, Flagstar Bank, Mirae Asset Securities and Industrial and Commercial Bank of China Financial Services filed petitions with the U.S. Bankruptcy Court in Delaware seeking to force Live Well into Chapter 7 bankruptcy, the Richmond Dispatch-Times first reported.
According to the filings, the creditors are looking to retrieve the collective $130 million they say they are owed.
In an affidavit filed by Flagstar, the federally charted bank said Live Well owes money on a warehouse line of credit and a bond-secured credit agreement, a debt totaling $69 million, which it demanded in full shortly after Live Well announced its closing.
Flagstar also questioned Live Well’s management.
“Given the Debtor’s recent mass layoff, there are serious questions regarding the management and control of the Debtor, its ability to protect and preserve assets (including any potential causes of action that may exist as a result of Live Well's activities), and liquidate in a manner that will maximize value for its creditors and other stakeholders,” the affidavit stated.
In its filing, Mirae said it was owed $22 million, while Industrial and Commercial Bank of China Financial Services said its debt totaled at least $40 million.
The three creditors asserted that a court-supervised liquidation of assets was the only method to recover what they are due.
For its part, Live Well filed an objection to the Chapter 7 petition on Monday, claiming that such a move would devalue its assets.
“Live Well has been working expeditiously with severely limited resources on the liquidation of Live Well’s assets outside of bankruptcy such as mortgage loans on its various warehouse lines of credit and mortgage servicing rights because of the severe impairment that a bankruptcy filing would cause to the value of these assets,” the company stated in its filing.
“These sales have been the top priority for Live Well in attempt to preserve value for Live Well’s creditors. Live Well has rightfully focused its limited time on engaging with purchasers and Live Well’s various regulatory agencies such as the Government National Mortgage Association ('Ginnie Mae') to ensure sales could be completed quickly in order to obtain maximum value before assets such as mortgage servicing rights are severely impaired by bankruptcy or loss of Live Well’s governmental approvals,” it added.
Live Well also hotly contested the suggestion of mismanagement.
“Delayed communications during a period when Live Well was in severe financial distress, however, is not evidence of management mismanagement and is not the basis for the ‘extreme remedy’ of the appointment of an interim trustee,” the company stated.
Live Well went as far as to assert that the creditor’s motives were verging on the personal: “To be sure, the true purpose of the Petitioning Creditors’ Trustee Motion is not to 'preserve,' but rather to punish Live Well’s management and to oust them from the Company.”