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Bankruptcy Keyed to Levitan, 3rd Ed.
In re Craddock-Terry Shoe Corporation
Citation:
98 B.R. 250 (1988)Facts
On April 30, 1986, Lincoln National Life Insurance Company and Westinghouse Credit Corporation loaned Craddock-Terry Shoe Corporation $9,000,000, secured by the mailing list, customer list, catalogs, and trademarks of Hill Brothers, a mail-order division of Craddock-Terry. When Craddock-Terry filed for Chapter 11 bankruptcy on October 21, 1987, it had shut down all operations except for Hill Brothers. At the petition date, Craddock-Terry owed Lincoln and Westinghouse $9,587,812.50, and the debtor had no equity in the collateral. During the bankruptcy case, Hill Brothers experienced serious cash flow problems that reduced order fulfillment rates, cut catalog mailings, and reduced the addition of new names to the mailing list, resulting in a significant decline in the collateral’s value. The plaintiffs’ expert testified that the value of the mailing list had declined from $8.7 million on the petition date to $5.7 million by April 30, 1988, using a discounted cash flow method. The debtor’s expert testified that the fair market value of the list if sold to other companies was only $700,000 on the petition date and had declined to $330,000 by the hearing date.
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