The bankruptcy trustee for WD Lab Grown Diamonds, which filed for Chapter 7 in October, has uncovered assets from the now-shuttered company, he wrote in a Dec. 5 filing in Delaware federal court.
As a result, WD’s liquidation is now “an asset case,” said the statement from the trustee, Jeoffrey L. Burtch.
“There are assets from which a dividend might possibly be paid to creditors,” added a second filing from court clerk Una O’Boyle.
Burtch’s statement did not specify the nature of the assets, or their dollar value. He did not respond to our request for comment.
The original bankruptcy filing from Beltsville, Md.–based WD expected that “there would be no funds for unsecured creditors.” It listed assets as $3.06 million and liabilities of $44.8 million. Its biggest debtor was secured creditor Tree Line Capital Partners, which was owed $36.03 million.
Tree Line is now backing former WD officials in a new venture, WD Advanced Materials.
The asset discovery doesn’t mean that unsecured creditors, who are owed $8.7 million, should expect much, says Adam Stein-Sapir, a managing partner at Pioneer Funding Group, a bankruptcy investment fund.
“Sometimes designations like ‘no asset’ are made very early in the case, within a few days of filing before a trustee has even been appointed,” he says. “Here, it looks like after the trustee was appointed, he did a little research and found that there are some type of assets he can monetize—at least enough to pay the attorney fees required. So this doesn’t necessarily mean that there is a ton of money available.”
In November, WD’s former CEO, Mike Grunza, told the bankruptcy court that the company’s failure was caused by falling lab-created diamond prices. “In one year alone, [the price] dropped about 83%,” he said. “The year before that, it dropped about the same amount. We could not keep up with the rate that the market was declining.”
(Photo: Getty Images)
Follow JCK on Instagram: @jckmagazineFollow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine
