February 22, 2023
Deco Lighting's Chapter 11 Saga Reaches Critical Point
Court-ordered liquidation looms possible as U.S. Trustee & Signify ratchet up pressure
Deco Lighting was founded in 2005 and quickly grew to become known as a young, nimble, fast-growing and edgy lighting brand. After experiencing a myriad of challenges, which according to Deco Lighting are no fault of its own, the company filed for Chapter 11 bankruptcy protection in February 2020. Deco Lighting was able to persevere through the proceedings and in June 2021, the court approved its bankruptcy restructuring plan, which required Deco Lighting to pay back its creditors over many years, while moving forward as a business.
Signify comes knocking
Under the restructuring plan, Deco Lighting secured additional financing and partnered with another Southern California lighting company, Premium Quality Lighting (PQL), but over the course of the last year, it appears that Deco is facing increasing financial pressure as it has seemingly fallen behind in payments due to its creditors.
In late 2022, global lighting leader, Signify, petitioned the U.S. Bankruptcy Court to enforce Deco Lighting’s obligations under the bankruptcy restructuring plan, claiming that Deco Lighting was seven months late on payments and still owed Signify $222,288. The debt stems from a 2017 settlement agreement relating to Deco Lighting’s alleged patent infringement. In January, the court determined "there is no dispute that the reorganized debtor has fallen behind on its plan payments." U.S. Bankruptcy Court Judge, Sheri Bluebond, ordered the parties to revisit the matter during a court hearing scheduled for March 29, 2023 and applauded Signify’s attorney for taking a modest approach.
U.S. Trustee Files Important Motion
A new hurdle has recently presented itself to Deco Lighting. Earlier this month, Eryk R. Escobar, Attorney for United States Trustee, filed a motion to dismiss or convert the Chapter 11 case to one under Chapter 7 or alternatively, for a court order directing Deco Lighting to file a disclosure statement and plan.
The U.S. Trustee claims that Deco Lighting owes the government past due quarterly fees for the second, third and fourth quarters of 2022 and that fees for the first quarter of 2023 are accruing. Escobar went on to state that the U.S. Trustee has attempted to resolve these issues informally to no avail.
UPDATE: Feb 22, 2:56pm EST - Statement from Deco Lighting:
If the case is indeed converted to Chapter 7 Bankruptcy, that would initiate a liquidation in which the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims. Other outcomes could cause Deco Lighting to continue to operate under its Chapter 11 restructuring plan, but such an outcome would likely involve the company proving that it is up to date, or will soon be up to date, on payments due to the U.S. Trustee.
The U.S. Trustee’s motion is scheduled to be heard by the U.S. Bankruptcy Court Central District of California in Los Angeles on March 8, 2023. Last week, a long list of Deco Lighting creditors – including lighting suppliers, distributors and agents – were sent notice about the important motion and upcoming hearing.
Deco Lighting, which is headquartered in Los Angeles County, exhibited at last year's IES Los Angeles 2022 Wally Whitney Memorial Product Fair but is not cited to be among the 140+ brands exhibiting at the 2023 rendition of the Product Fair that will take place tomorrow in Downtown Los Angeles.
