YOUNGSTOWN, Ohio – A federal judge has appointed a receiver for Schwebel Baking Co.’s operations wind-down, writing that receivership “will do more good than harm by preserving value” and providing court-supervised control.

The order stems from a lawsuit filed last week by Spectrum Commercial Finance LLC, which contends Schwebel owes it nearly $3.8 million plus interest, cost and fees. Spectrum asked the court to appoint a receiver.

In the order filed Tuesday, U.S. Judge John R. Adams of the Northern District of Ohio listed several reasons a receiver should be appointed: 

  • Spectrum is owed a substantial sum.
  • Spectrum has “perfected security interests in substantially all personal property collateral of the receivership entities.” 
  • The receivership entities are in default and winding down substantially all business operations.
  • “There is imminent danger that receivables, inventory, equipment, cash, proceeds, records and other collateral and property will be lost, dissipated, concealed, impaired or diminished in value absent immediate receivership relief.”
  • Schwebel has multiple pending proceedings against it and legal remedies are inadequate to protect Spectrum, the receivership entities, employees, vendors, creditors and other parties in interest.
  • A receivership “will do more good than harm by preserving value and providing transparent court-supervised control over the wind-down.”
  • No less drastic remedy will adequately protect the property and parties in interest under the circumstances.

Schwebel is in continuing default of its obligations to Spectrum, the judge wrote.

“They have not paid their debts when due and are insolvent or in immediate danger of being insolvent,” his order continued. “The balance of the equities in this case dictate appointment of the receiver to take control of the business operations of receivership entities and take control of the receivership property.”

In a July 15 motion seeking emergency consideration and appointment of a receiver, Spectrum’s attorneys wrote that without that appointment, “Schwebel will lack the liquidity necessary to fund payroll, preserve collateral, continue wind down activities, collect receivables, pay ordinary and necessary expenses and avoid a disorderly shutdown. The risk is not theoretical.”

Schwebel, according to the order, has experienced adverse change in its business and financial condition, and the company has retained KCP Advisory Group as a restructuring adviser.

Spectrum’s motion sought the appointment of KCP, through its team led by CEO Jacen Dinoff as receiver. 

“The court finds that KCP is qualified to serve as the receiver in this matter,” the judge’s order said. “Further, KCP has significant receivership experience …”

Schwebel announced last month that it would be winding down operations this summer and that it expected to initiate liquidation of its assets. It said it has faced significant operational and financial constraints for many years. Among its challenges, it cited aging manufacturing facilities and equipment, costly labor contracts and pension obligations and consumer trends depressing demand for traditional bakery and bread products.