US: Raleigh Company Offers $75,000 for Piece of 3 Mocksville Tobacco Manufacturers

Source from:  Winston-Salem Journal  08/23/2013

A Raleigh tobacco company may finally get its piece of three defunct Mocksville tobacco manufacturers, only this time at a much lower price tag.

Peter Tourtellot, bankruptcy trustee for Renegade Holdings Inc., Renegade Tobacco Co. and Alternative Brands Inc., said in a filing Wednesday that CB Holdings LLC has offered to buy the companies' cigar and pipe tobacco brands and trademarks for $75,000.
 
In November 2011, CB Holdings' offer of $16.1 million for the companies was considered by Tourtellot as too low and not being "in the best interest of creditors" given the companies' overall financial obligations at that time.

Also included in the deal are the ingredient lists, blends and other intellectual property for the companies' cigarette brands, but not the brands themselves.

The companies' 15-year run of making discount cigarettes ended July 23 when the decision was made to liquidate them after a proposed $25 million deal collapsed involving Globe 360 Tobacco Inc., the U.S. subsidiary of a French tobacco manufacturer.

At the end, the Mocksville companies had a combined 83 employees, including 70 in production.

"The debtors have experienced a sharp decline in sales, have discontinued manufacturing and have minimal cash reserves," Tourtellot said in his motion. He said some groups have delayed or refused to make payments due to the debtors.

"Consequently, the debtors have an emergency need for cash to pay on-going costs of administration and preserve the value of the remaining assets."

A hearing on the motion is set for 9:30 a.m. Tuesday at the U.S. Bankruptcy Court in Greensboro.

After the landmark 1998 Master Settlement Agreement between 46 attorneys general and major U.S. manufacturers, smaller cigarette-makers emerged such as Renegade, grabbing significant market share because they could sell cigarettes for less.

The states have since passed laws aimed at reducing the smaller manufacturers' competitive advantage by forcing them to put money into escrow in case they are sued by the states. Renegade opted to join the MSA in 2008 to sell its cigarette brands nationally.

By then, however, Renegade's competitive advantage was fading.

What makes the companies' escrow rights valuable is the holder can receive the interest on the principal and would receive whatever money remains in its fund after 25 years. Alternative's escrow rights are estimated to be valued at $41.9 million.

Tourtellot said Thursday he did not know if CB Holdings would make another bid on the escrow rights.

Tourtellot said all of the remaining assets, outside the escrow rights, are subject to a lien by Bank of the Carolinas. The company is attempting to sell its branded cigar inventory to Cherokee Tobacco Co.

At a bankruptcy hearing July 23, Tourtellot and John Northen, an attorney representing Tourtellot, downplayed the value of the cigarette brands because they were likely to be de-listed as part of the liquidation.

Cigarettes typically are on a government-approved list of tobacco products. Companies not on the list have difficulty getting their products onto retail shelves. Enditem