Managers and staff of Renegade Holdings Inc. want the shedding of his legacy, and painted the name was so simple, like a snake shedding its skin.
But after more than three and a half years in Chapter 11 bankruptcy protection, they know that only hard work, transparency, and some regulatory breaks will give them a chance to succeed, not the company owner, Calvin Phelps.
Phelps is awaiting sentencing after pleading guilty in June of federal charges of fraud and making false statements and illegal financial transactions in the state of Mississippi. He could be sentenced to up to 43 years in prison.
The goal is to get out of Renegade bankruptcy in early 2013 focused mainly on the filtered cigars, including an international sales contract, and taking their brands at a discount national.
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At that time it will bury Renegade name and go with the name of a subsidiary, Alternative Brands Inc. It will make discount cigarettes Murano and pipe tobacco brands Speedway behalf of the company.
Companies want to prove to customers, suppliers and the local community that they will do more than just survive once out of bankruptcy. They have a total 85 people, compared with 140 when they first entered bankruptcy in January 2009 and compared with 94 in April.
Nevertheless, the leadership knows that thrives in developing an active competitive industry will not be easy.
"We did some hard work just to stay in business," said Peter Tourtellot, the court-appointed bankruptcy trustee who watched from the Renegade July 2010.
"We had current and potential customers and suppliers are afraid to deal with a company in bankruptcy, especially in the machinations of Calvin Phelps has become clearer.
"We hope that the answer to the question" Will you deal tomorrow? Especially in the large chains that do not bring a new product on a whim. "
Risk-taking bravado
Rarely company name captured so well the risks bravado of its founder and owner of a Renegade. It was Phelps’s business savvy; they found a loophole in the lucrative landmark 1998 Master Settlement Agreement with 46 states and major tobacco manufacturers.
The agreement establishes a framework for the participation of marketing by tobacco companies, and requires annual payments to the states, primarily to pay for smoking cessation and prevention programs.
The agreement, however, did not initially require less no-MSA participants for payment, which allows them to sell cigarettes at a significant discount.
With Renegade flush with profits, Phelps transferred 8.1 million dollars in assets on bills in the names of companies, an expert on bankruptcy renegade states in the lawsuit.
This included the transfer of Phelps and his wife, Lisa, to afford a lavish lifestyle that included spending millions to buy Chinqua Penn plantation, as well as exotic cars, artifacts, furniture, a guitar and a collector of firearms.
States closed the loophole by passing laws forcing small companies to invest money in escrow in case they filed a lawsuit against the state. As a result, Renegade decided to join the MSA in 2008 to sell its cigarette brands at the national level.
By that time, however, the competitive advantage of Renegade was fading.
The following diagram Phelps was the strategy of export of cigarettes, which caught the eye of federal regulators, as he tried to avoid the tobacco settlement of about $ 4.98 million.
Four years of a criminal case in Mississippi led to federal charges of fraud and making false statements and illegal financial transactions, which Phelps pleaded guilty. In addition, he is faced with the requirement to forfeit up to $ 2 million of their money.
Troubles surface
Because Phelps bought the latest equipment, pay competitive wages and hired many of the former RJ Reynolds Tobacco Company employees for their experience, many workers and local residents gave him the benefit of the doubt, when the financial and legal problems of companies surface.
When Renegade went bankrupt the first time in January 2009 few people called the Winston-Salem Journal to point out all the good that Phelps has done for the workers. Renegade exit bankruptcy in June 2010, but was sent back to the bankruptcy seven weeks later, when details emerged of the criminal investigation into the operation of Mississippi Phelps.
Tourtellot said that he felt cold, decided when he took over for Phelps, especially when he walked the factory. “There were employees who have made it clear he did not want one of the companies, except for Calvin,” Tourtellot said.
The more criminal problems Phelps on the surface, some employees have no rights to Phelps. Others were let go "for the benefit of morality," Tourtellot said.
Some current employees said Phelps does not think the rules and regulations applicable thereto.
Monica and Michelle Cornelius Spillman, sisters and Renegade staff for 11 years, said they could feel the tension in the plant.
"We thought we could make it through all the charges and bankruptcy because there are many good people is still here," said Cornelius.
"Some people can not see that the company had more than one person. New leaders are trying to do things right the first time, instead of labels.”"
Spillman said Phelps and his management team "was able to make people believe that they would like to believe."
"Calvin is always speaking to us as a family. But you do not put the living conditions of family members at risk for the sake of personal wealth, as he did," said Spillman. "There’s a new attitude here. People want to get this company because they believe in the quality of the product here."
The last major legal obstacles
After reaching the escrow agreement with the Missouri and South Carolina last month, a dispute with Tennessee seems to be the last major legal obstacle to emerge from bankruptcy Renegade, Tourtellot said.
A group of 16 states claimed that they were obliged to deposit payments and penalties to the alternative. Tennessee holds the test of its claim of $ 3.4 million deposit offenders and nearly 10 million dollars in fines.
"Hopefully in the next few weeks we will have a better understanding of their requirements," Tourtellot said.
The Company is obliged to submit monthly financial statements. In May it was $ 2.74 million in revenue and cash earnings of $ 141,880.
Revenues Renegade has subsided and flowed at times, because the company stopped doing business with some of the legacy clients. "They wanted to get the same deal, which Calvin had given them, and we are not going to do,"said Tourtellot.
The company is betting on a profitable niche in the market – is filtered cigars – which can dry out, depending on the Food and Drug Administration allowed to regulate these products, as it now makes cigarettes.
Cigar industry is lobbying Congress to make an exception for filtered cigars, especially the well-known brands, because they smoked mainly adults. Anti-tobacco advocates want to filter cigars are taxed just like cigarettes.
"Once Congress has increased the tax on small cigars $1 a pack in 2009, many companies have simply added a bit of tobacco, so that they fit the definition of the lower taxed big cigars," said Bill Godshall, executive director of Pennsylvania’s tobacco smoke.
Tax rates could mean $7 difference between the carton of cigarettes and a box of cigars are filtered in accordance with Philip Ziesemer, CFO renegade.
Renegade is also dependent on revenues from the sale of pipe tobacco, which are taxed at a rate of more than nine times smaller than a roll of his own tobacco, or $2.83 per pound compared with $24.78 per pound.
"Reynolds and Philip Morris gained control over most of the counter space of the display, so it’s hard to get visibility for our brands of cigarettes and grow them in a significant way,"said Buster Yarbrough, vice president of operations.
"But their contracts do not solve the filtered cigars, so we can get that counter space."
Fred Burke, vice president of Renegade sales and marketing, said the company has gone so strong, is filtered in the direction of a large cigar, “because there are going to consumers at affordable smoke.”
"We want to be number 1 in our level, as a way to make it go through the national networks and major distributors. How we do it by proving yourself every day because they read Calvin Phelps and bankruptcy history, too."
In June, the company launched a new website, www.abibrands.com, to get the word out about their products.
"We have received positive reviews in recent years, after a slow start," said Greg Feron, vice president of sales contract. "We were dealing with a certain fear of rumors from competitors.
"More prospective customers take us to our offer to come to us and you’ll see the difference, not having Calvin is responsible for them."
Reorganization Plans
Terry Bralley, the president of Davie County Economic Development Commission, said that he hopes will be Renegade successfully from bankruptcy, in part because the Renegade job to pay higher wages than the average for the county of $ 28,028.
"After meeting with management, and seeing the successes they’ve done, no doubt, in my opinion, they will appear successful and profitable and an important employer for our community for a long time," said Bralley.
The reorganization plan calls for the Renegade Company financial obligations, payable over four years out of bankruptcy. These include federal and state excise taxes of approximately $870,000.
As part of bankruptcy proceedings in April auctions Chinqua Penn artifacts and furniture, as well as certain assets Phelps, has raised $ 3.44 million net proceeds in the estate. The six properties owned or controlled by Phelps in Davie County were sold at auction in June 2011, giving $576,917 in net revenue.
Lenders fund up to $ 10 million will be created from the funds from current operations, the money recovered from Phelps’s financial obligations, the new shares sold to investors and potential refinancing of the company. Currently, the management team will be given 25 per cent share of the property as an incentive to keep the company profitable.
"We hope not only to be successful and profitable during this time, but will probably be a buyer on the expiration of five years," said Tourtellot. "We’re more involved with trade groups and shows. We want a seat at the table that Calvin avoided.
"In the long term, this company will be better, even after going through the pain." Enditem
