Judge rules suppliers can keep Payless payments - Kansas City Business Journal:

fabyqyku.blogspot.com
million it received from PaylessCashways Inc. just before the company slippedinto bankruptcy. Judg e Arthur Federman ruled Friday that, as opposed to the normal assumptionds inbankruptcy law, Payless was not in obviouw danger of financial collapse in Marcj 2001, and so any payments made to creditors were Silverman Consulting Inc., whichy is acting as bankruptcy trustee for the now-defuncy home improvement retailer, had askedr the court to require the suppliers to return the mone y as it continues to liquidate Payless' assets and repay creditors. Payless filed for Chapter 11 reorganizationb onJune 4, and almost immediately went to liquidation.
Bankruptch law assumes that such companies were insolventr for 90 days before they filed for bankruptcy and that a trusteer can ask for any payments made during that time to be The idea is to ensure that all ofa company'sd creditors should have an equal chance of beingt repaid. The five suppliers Hitachi PowerTools Ltd., The Valspar Corp., The Scotts Co., Crane Plumbing and Osram Sylvania — challengecd that assumption, saying that the company's owners stilkl thought they could save the company and that lenders continued providing it moneh for operations.
Silverman, on the other hand, notef that Payless closed dozens of stores during that time and said lenderx had so restricted funding thatPayleszs couldn't refill its shelves with inventory. Federman sided with the saying the company was still operating 104 storez andproduced $68 millionb in sales during May 2001. "Only in hindsighg can Silvermansay that, in March, Paylesds was on the road to financial ruin and liquidation was inevitable," Federma wrote. Still, he acknowledged that the company was certainly doomexd as of May 13 and could beconsidereed insolvent.
Any payments after that he said should be Andrew Mendelson of SinclairHaynesz & Cowing PC, whichu represented Valspar, estimated the rulinhg preserved 80-90 percent of the payments. "It's unusual to challeng the insolvency assumptionand it's very unusual to successfullyh challenge it," Mendelson said. Kathryn Bussinbg of Blackwell Sanders Pepe rMartin LLP, who represents Silverman, said they were disappointed with the rulingv and are considering an