July 13, 2022
Strand Lighting, LLC Files for Bankruptcy
Move might be business risk-related and not due to financial distress
DALLAS, TEXAS — Theatrical lighting and controls manufacturer, Strand Lighting, has had numerous owners throughout its 100+ year history. In 2006, the company was purchased by Genlyte Group which eventually morphed into the company we know today as Signify.
On Monday, Dallas-based Strand Lighting, LLC filed for Chapter 7 Bankruptcy Protection in U.S. Bankruptcy Court for the Northern District of Texas. But this isn’t a run-of-the-mill manufacturer bankruptcy filing. Let’s break it down:
Are the Strand Lighting brand and products going away?
This is the big question we were hoping to have answered by press time.
We have been in fairly regular communication with Signify over the last 24 hours, but the company has yet to provide us with any official statements or answers to a few basic questions relating to the Strand Lighting matter. It’s quite possible that the Strand Lighting brand and product portfolio will live on and that this bankruptcy filing aims to provide legal and financial risk mitigation. More on that later.
RELATED: Strand Issues Statement About its Future »
Can a subsidiary of the world's largest lighting company really go bankrupt?
Strand Lighting, LLC is one of approximately 150 global companies owned by Signify. There over 25 Signify-owned legal business entities in North America alone.
And, yes, subsidiaries can go bankrupt while the rest of the business carries on. In certain circumstances bankruptcy can protect the parent company from a defunct subsidiary’s obligations. In other cases, the parent company may carry some obligation to the bankrupt subsidiary’s creditors. This is a multi-faceted business law issue.
Chapter 7, not Chapter 11
In Chapter 7 bankruptcy proceedings, businesses are liquidated to pay off creditors. They do not restructure and continue to operate like Chapter 11 companies normally do.
Asbestos Litigation: Mesothelioma
The bankruptcy filings we’ve seen from other lighting manufacturers typically include a long list of creditors that cite components makers, freight companies, equipment providers and lighting agents, among many other types of companies. The Strand Lighting, LLC bankruptcy filing shows that it owes no monies to typical manufacturing vendors. Instead, the company cites an unusually short list of 23 creditors: the Internal Revenue Service, sister company Genlyte Thomas for the 30 days that remain on the building lease and 21 law firm creditors.
In unraveling the details surrounding the 21 law firm creditors, we found that all 21 claims are disputed by Strand Lighting and are contingent upon the outcome of pending litigation. We weren’t able to locate the details of all 21 lawsuits cited in the bankruptcy filings, but at least ten of the cases are personal injury cases related to asbestos product liability. Nearly all of the cases are in New York and California courts.
The asbestos litigation cases typically cite Strand Lighting as one of numerous defendants. Sometimes 30 or more defendants are listed – a strategy that is apparently common in these types of lawsuits. The product liability claims seem to relate to the use of asbestos-insulated wiring that was allegedly used in Strand Lighting products decades ago. The plaintiffs are often individuals who worked in technical roles in theater environments or theatrical supply occupations.
Is the Strand Lighting business simply moving to another internal subsidiary?
From a market standpoint, it seems that Strand Lighting, LLC has paid its vendors, agents and other business partners. Based on some conversations we had with multiple Strand lighting agents on Tuesday, the brand is not giving off signals of financial distress.
So the bankruptcy filing of Strand Lighting, LLC could simply be a legal way for the company to reduce the financial risk of present and future product liability lawsuits. It’s quite possible that the Strand Lighting business has been transferred to another Signify subsidiary, i.e. Dallas-based Vari-Lite, and that the market-facing side of the business sees no disruption.
Examination of the Strand Lighting, LLC revenues may lend support to the notion that the Strand Lighting business has been transitioning to another Signify subsidiary:
-
2020 sales: $21.3 million
-
2021 sales: $7.6 million
-
2022 YTD sales: $2.9 million
Most lighting industry observers might expect theatrical brands that rely on live event revenue to have a challenging pandemic, but the revenue dips above, particularly the paltry 2022 numbers may indicate that the Strand Lighting business has already been transitioning to another Signify company.
We hope to get some clarifications and answers from Signify on this matter, but due to this being the quiet period before its July 29 quarterly earnings announcement, we may have to wait a few more weeks to get some solid answers.
RELATED: Strand Issues Statement About its Future »
