Corporate Resource Services Inc Files for Chapter 11 Bankruptcy Protection

Corporate Resource Services Inc Files for Chapter 11 Bankruptcy Protection

Corporate Resource Services, Inc., one of the largest staffing firms in the U.S., has filed for Chapter 11 bankruptcy protection. According to Reuters, the company’s decision to seek bankruptcy protection followed the discovery of approximately $80 million in unpaid taxes.

The company has been engaged in an orderly wind down since February by downsizing its personnel, collecting receivables and liquidating assets. Currently, the firm lists its total liabilities between $50 million to $100 million.

In the bankruptcy petition, the company claimed that one of its seven subsidiaries, TS Employment Inc., failed to remit more than $80 million in taxes to the IRS, mostly related to employee withholding taxes. CSR claimed that the timing of the discovery was a worst case scenario, as the company was on the verge of finalizing a funding deal with Wells Fargo loans. As a result, the company’s attempts to negotiate a lending agreement and a debt refinancing deal with Wells Fargo were negated, although CSR did reach an agreement with Wells Fargo to finance a wind down of its business for a limited period. Also, as part of this agreement, TS Employment Inc. then filed for Chapter 11.

The company received approval from U.S. Bankruptcy Judge Mary F. Walrath for the deal with its prepetition lender Wells Fargo NA. As part of this deal, CSR has short-term access to cash throughout the orderly wind down process involved in the Chapter 11 restructuring plan. The Judge also issued her approval of a slate of first-day pleadings, which include a short-term motion that enables CSR to finance the case with cash collateral for up to two weeks.

Currently, the company’s wind-down has generated $60 million, representing the outstanding principal and interest obligations on the debtors’ loans. However, the company has continued to monitor its cash closely for all seven subsidiaries to prevent future indemnity obligations and overdrafts.

It is worth noting that CSR disputes Wells Fargo’s claims and has reserved all rights against Wells Fargo for its prepetition actions. TS Employment has also asserted a claim against CSR’s $60 million, which the company has disputed by arguing that TSE destroyed its value.

As stated in the agreement with Wells Fargo, the financial institution will provide financing to CSR for an “interim interim period” where the two parties will negotiate a long-term deal.

With the reorganization period, CSR hopes to buy time in order to continue the process of liquidating its assets. This sales process will include finding appropriate buyers for the company’s receivables.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.