Filing Alert: Hobbico Files Chapter 11 to Complete a Sale Process

Illinois-based Hobbico, Inc. sought chapter 11 bankruptcy protection yesterday in Delaware. Its goal? To continue a sale process started late last year.

The Bankruptcy Sale

The company says it is “actively” discussing a sale with potential buyers. (Translation: It does not yet have a commitment from anyone.) Hobbico’s prepetition lenders are financing the sale effort. They are calling for the following sale schedule:

  • Sale procedures by March 9;
  • A bankruptcy auction by March 26; and
  • A sale closing by April 5.

Events Contributing to the Bankruptcy

The company blames its bankruptcy on various events, including:

  • High leverage due to various acquisitions;
  • Lagging product innovation;
  • An underdeveloped e-commerce platform;
  • An increasingly competitive drone market;
  • Vendor issues; and
  • Depressed sales.

These factors eventually triggered defaults with the company’s secured lenders. They also lead to a deadly spiral of constrained liquidity, inventory shortages, and falling sales.

Additional Information

JND Corporate Restructuring is the claims agent. The case is assigned to Judge Kevin Gross (case number 18-10055 (KG)). Information about the Committee formation meeting is available here.

Company Background

Hobbico designs, manufactures, and distributes drones, radio controlled vehicles, and other cool hobby products. I wanted to post pictures for you, but I can’t find any on their website. (Underscoring my earlier point about their underdeveloped internet presence.) But the website does identify many of their 250 brands. These include Axial, ARRMA, Revell, Estes, Great Planes Model Manufacturing, DuraTax, and Top Flite. Based in Illinois, the company has operations and facilities in California, Colorado, Illinois, and Nevada.axid9060

Tower Hobbies is the company’s retail arm. It is also their highest margin distribution channel. Revell, Estes-Cox, and United Model make up its mass market business. And Great Planes represents the company’s wholesale operations. Besides its own trademarks, the company licenses various trademarks.rise0207

Wait…!  Their drones and other toys are featured on the Tower Hobbies retail website. Too bad Christmas is over….

Mette K.

Earthquakes, Sharkcicles… And a New Venue Reform Bill! I moved from California to Delaware, a number of things have happened.

  1. Last November, a magnitude 4.1 earthquake struck central Delaware. “This is wild!  It’s not often that this happens,” said Cheng Shengzao, a geophysicist with the USGS.
  2. In December, a bomb cyclone blasted the entire East Coast before a polar vortex uncorked tremendous cold, turning sharks into sharkcicles and causing frozen iguanas to fall out of trees in Florida. “Jaw, meet floor!” tweeted Sam Lillo, a meteorology PhD student.
  3. And today, as anticipated in my earlier post, another bankruptcy venue reform bill was introduced.

So let me clear up any misconceptions for my new Delawarean colleagues. These things are not my fault. My husband says they aren’t even about me. (Although I’m beginning to have my own doubts.)

With that out of the way, on to the venue reform bill.  Read a full discussion and access the text of the bill here.

Mette K.

Cornyn & Warren Introduce the Bankruptcy Venue Reform Act of 2017

Earlier today, Senators John Cornyn (R-TX) and Elizabeth Warren (D-MA) introduced the Bankruptcy Venue Reform Act of 2017. The bill would require companies to seek bankruptcy protection where they have their principal assets or their principal executive offices. And it would eliminate the possibility of filing where they are incorporated and restrict their ability to file where an affiliate’s case is pending. The end result? The bill would effectively limit access to popular bankruptcy courts in New York and Delaware. If passed, this would represent a seismic shift for corporate bankruptcies.

The Rationale for the Bill: Preventing Corporate Abuse

Sens. Cornyn and Warren said in a joint statement that the bill is meant to strengthen the integrity of the bankruptcy system and build public confidence by preventing companies from “shopping” for favorable courts. The bill is also intended to allow employees at bankrupt companies, small business creditors, and others to participate in cases that will have tremendous impacts on their lives.

“Workers, creditors, and consumers lose when corporations manipulate the system to file for bankruptcy wherever they please. I’m glad to work with Senator Cornyn to prevent big companies from cherry-picking courts that they think will rule in their favor and to crack down on this corporate abuse of our nation’s bankruptcy laws.” -Sen. Warren 

The bill is endorsed by the Commercial Law League, Texas Bankruptcy Bar Association, Texas Hotel & Lodging Association, Boston Bar Association, Ag & Business Legal Strategies, and… the Iowa Bankers Association.

Another Viewpoint: Litigation at the Speed of Business

Proponents of the current system, however, argue that experienced courts and judges can better handle complicated issues in a big bankruptcy case. This leads to greater predictability, thus reducing the cost, risk and delay associated with bankruptcy filings. And those benefits, in turn, help to save businesses, preserve jobs, and reduce creditor losses.

The bill faces opposition from Gov. Carney and Delaware’s three federal lawmakers, who said in their own joint-statement that more than two-thirds of U.S. businesses in the Fortune 500 incorporate in Delaware to gain access to “Delaware’s world-class bench and bar with exceptional expertise in corporate legal issues, including bankruptcy.”

“Denying American businesses the ability to file for bankruptcy in the courts of their choice would not only hurt Delaware’s economy but also hurt businesses of all sizes and the national economy as a whole. Our economy thrives when the bankruptcy system is fair, predictable, and efficient. Experienced bankruptcy judges are critical to ensuring that companies can restructure in a way that saves jobs and preserves value.”

This is something I can now begin to speak to from some level of personal experience. After attending the Pre-Admission Conference for new Delaware lawyers held by the Delaware Supreme Court, two themes stood out. An unwavering insistence on civility and the highest ethical and professional standards. And an uncompromising commitment to delivering “litigation at the speed of business.”

Further Reading: Full Text of the Bill

The bill’s complete text is available here.

Mette K.

Filing Alert: Puerto Rican Seaborne Airlines Files Chapter 11 in Delaware

San Juan-based airline Seaborne Airlines filed for chapter 11 protection today. The corporate debtors are SeaStar Holdings, Seaborne Virgin Islands, and Seaborne Puerto Rico.

A Pending Sale to Silver Airways

A statement is available on the company website. The bottom line? Seaborne Airlines is being sold to Silver Airways. The sale is subject to an auction and court approval. And if it closes, the sale will create the industry’s leading regional carrier in the Caribbean, Florida, and the Bahamas.

Meanwhile, the company plans to continue normal operations. It is supported by a new, $4.2 million credit facility.

“While the Company’s business has enjoyed a remarkable recovery since the 2017 hurricanes, the financial stress . . . coupled with legacy liabilities have made it necessary to seek reorganization . . . . Our day to day operations will continue as normal, and this process will be in the best interests of all of our customers and stakeholders.” 

-Ben Munson, Acting CEO of Seaborne Airlines


If you are planning to fly Seaborne, the company wants you to know that passenger service and safety remain top priorities. Good to know!

And existing flights should continue without interruption. Also good information, especially if you are heading south in search of warmth. The 10-day weather forecast for the Caribbean?  Mostly sunny with a high of 78 degrees.  And in Delaware?  Early ice, with highs of around 40 degrees.

Additional Information

The case is pending in Delaware, Case #18-10039. The claims agent is Rust Consulting/Omni Bankruptcy.  For more information, watch their website. Or you can contact the company at:

Phone: 787-946-9003

Mette K.