US audio Company Audio Research Corporation has been placed into receivership as the business whose products are distributed in Australia by Melbourne Synergy is fighting to stay afloat and is dependant on finding a buyer for the business.
The audio Company who have been around since the early 1970’s has bought in US Company Lighthouse Management in an effort to restructure the business, the extent of the debts are not known.
In the USA receivership is not bankruptcy – it is an alternative means that can buy struggling companies time to try and find funds to get themselves out of trouble.
However things are not looking good for ARC when Last week the Minnesota Bank & Trust told a US Court that the principal owner of ARC Trent Suggs, has been subject to “Numerous events of default” which still “are continuing and that they want to get their loans back.
Trent Suggs Former CEO Audio Research Corporation
The bank asked the court to issue a judgment for A$2.52M the amount owed, plus accrued interest, plus attorneys’ fees, and other collection costs.
As part of the restructure the assets of the business have been transferred to a trust controlled by an “assignee” who is now making all operational and financial decisions, while trying to dispose of assets in a manner that is best suited for the benefit of the company’s creditors.
According to Phil Sawyer the CEO of Synergy Audio “little has changed” at the Company which he claims is “trading as normal.
ChannelNews understands that the business was unable to obtain funds for the business prior to the Audio Research Corporation being placed into receivership.
A senior insider at the Company wrote on one social media site “Trent Suggs was relieved of control of Audio Research, and we have been working with individuals to purchase the company. We expect to have a new owner very soon.”
In a statement sent to ChannelNews by Synergy ARC claims “Little has changed outwardly, Audio Research remains staffed…assisting owners via email and on the phone; the service department continues, repairing products; production is building new products and performing updates
“Our parts inventory has been good. We continue to receive parts shipments; our sales department, continues to accept product orders, and our shipping department continues shipping parts and product orders along with completed service units”.
A hearing has been scheduled with a Minnesota court on May 17th with District Judge Susan N. Burke is set to decide what will happen with claims being made by secured creditors such as the Minnesota Bank & Trust.
Audio Research has filed documents with the Minnesota District Court notifying it that the company was entering into an Assignment for the Benefit of Creditors (ABC).
Choosing Assignment for the Benefit of Creditors is an operating option that is an alternative to filing for bankruptcy.
ChannelNews has been told that businesses in the USA are struggling to refund debt due to inflation issues and the state of the US economy where several banks have found themselves in trouble.
Audio Research was founded in 1970 by Bill Johnson, a former audio dealer in Minneapolis who had been designing amplifiers since 1951.
Johnson sold ARC in 2008 to Quadrivio, an Italian private equity group that owned Sonus Faber.
He passed away in 2011. In 2020, TWS Enterprises acquired the company from the McIntosh Group.
TWS is a company owned by Trent Suggs, a former ARC employee.
A 15-page document filed by the Minnesota Bank last week reveals that the bank is asking the court to enter a judgment for US$1.6 million against Audio Research Corporation and owner Trent Suggs, they also want an order that all collateral and assets held by Audio Research Corp. and/or Trent Suggs must be physically turned over to the bank.
The documents reveal the following borrowing trail for the audio business and owner Trent Suggs:
December 16, 2021 – Trent Suggs/ARC executed a promissory note with the Minnesota Bank & Trust in the amount of $500,000.
May 24, 2022 – This original loan was “amended and modified, at Borrower’s request,” increasing its amount to $1,750,000. Notably, this loan was now “asset based.”
These loans are covered by a “perfected” security agreement with the bank.
The loans are further secured by a commercial guarantee by Trent Suggs and TWS Enterprises (a separate company owned by Suggs).
As of March 14, 2023 – “Numerous events of default have occurred and are continuing…” Examples of default include Audio Research Corp. having a negative net income in fiscal 2022, adverse changes in borrower’s financial condition, the bank’s belief “that the prospect of payment or performance of the loan is impaired,” and more.
Also, on March 14, 2023 – Suggs and the bank sign a new “Forbearance Agreement.” This agreement gave Suggs twenty days to inject working capital from equity investors of at least $750,000 into ARC.
It also gave him ten days to “engage a business consultant with demonstrated expertise in Borrower’s subject industry.”
June 16, 2023 – If Suggs/ARC had performed in accordance with the Forbearance Agreement, then the company would have until this date in June to pay off all of its debt to the bank.
And if Suggs and ARC did not perform perfectly in accordance with the Forbearance Agreement, they are going to be considered as being in default.
The Company statement sent to ChannelNews is not attributed to any individual, but it does claim that the audio Company ” Have been working and meeting with individuals to purchase the company and we expect to have a new owner very soon. There will be continuity as production, engineering, purchasing, service, and critical personnel will remain working for Audio Research”.
