An early January hearing for Sortis Holdings could decide whether the business will be forced into bankruptcy against its will.
The Portland company’s attempt to have the bankruptcy case postponed was denied by a federal bankruptcy judge on Wednesday, who instead scheduled a crucial hearing for next month.
Sortis Holdings, now known as SoHi Brands, may have to sell off the chain of well-known Northwest eateries and lifestyle businesses it amassed during the pandemic if it files for bankruptcy.
Last month, four creditors asserted that they owed more than $8 million and attempted to force Sortis Holdings into bankruptcy. The greatest debt in the group, according to GEC Fellow Barber Fund I LP, is around $7.5 million; Scott Kasen is supposedly owing $719,000; Generation Equity Capital, based in Boston, is allegedly owed $94,000; and George Kassapakis is allegedly owed $40,000.
In the event that Sortis Holdings is forced into bankruptcy, other creditors have lined up in court documents to make sure that the obligations they claim are paid off.
The state of Oregon is one of them, claiming in a filing this week that it owes almost $31,000 in overdue unemployment insurance taxes. Justin Leonard, an attorney with the state Department of Justice, participated in the hearing via phone on Wednesday and responded to the judge’s standard scheduling inquiries.
Sortis Holdings requested in court documents that Oregon U.S. Bankruptcy Judge Teresa H. Pearson halt the Chapter 7 case while it pursues a lawsuit it filed against three of the creditors in New York.
In that lawsuit, which was filed on December 6, Sortis Holdings asserted that it paid more than $22 million in promissory notes and Sortis shares to acquire the boutique barbershop chain Fellow Barber in order to expand into New York. However, the lawsuit claims that Sortis Holdings, the company that also owns Rudy’s Barbershop, attempted to terminate the merger after learning that Fellow Barbers’ records were misstated.
In court documents, Sortis Holdings further alleged that Generation Equity Capital and the co-founder of Fellow Barber were planning to force Sortis into default in order to foreclose on their collateral, buy back Fellow Barber at a discount, and use the circumstances to buy Rudy’s Barbershops from Sortis.
It requested, among other things, that the New York court prevent the collection of purported obligations by Generation Equity Capital and other noteholders.
A creditor attorney in the bankruptcy lawsuit contended on Wednesday that, excluding any appeals, the New York litigation may take up to four years to settle. GEC Fellow Barber Fund I LP lawyer Alan L. Braunstein went on to refer to the case as a diversionary ploy.
When asked about Braunstein’s schedule by the judge, Travis J. Mock, a lawyer for Sortis Holdings managing the New York complaint, said it relied on how the defendants battled the issue on their end.
Instead of suspending the case on Wednesday, the judge decided to set a two-day evidentiary hearing in Portland that would begin at 9 a.m. on January 13. Sortis Holdings would be placed in bankruptcy like a debtor who had filed voluntarily if the judge later issued an order for relief.
During the COVID-19 epidemic, Sortis Holdings—now known as SoHi businesses—invested in well-known Northwest businesses including Rudy’s and Bamboo Sushi. However, during the epidemic, business was sluggish to recover, and its financial issues grew worse when it was unable to finalize a planned $85 million acquisition of Ace Group International, the company that owns the Ace Hotel brand.
Numerous creditors have sued it; many of them have now reached settlements without a trial. Others are still open.
–Jonathan Bach covers real estate and housing. You can contact him by phone at 503-221-4303 or by email at [email protected].
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