Bankruptcy judge OKs NanoMech settlements

Deal with creditor, land sale approved

A judge has approved two settlements in the bankruptcy of NanoMech, clearing the way for the closure of the proceeding that began nearly a year ago.

On Wednesday, bankruptcy Judge John Dorsey in the U.S. Bankruptcy Court for the District of Delaware, filed an order approving a settlement between NanoMech’s officers and directors and its primary secured creditor, Michaelson Capital of New York.

The settlement provides a general release to the directors and officers of the Springdale company. In consideration, the directors and officers’ insurer will pay NanoMech $1.7 million, of which $1.68 million will go to Michaelson and with $20,000 going to the NanoMech estate.

The U.S. trustee had objected to the deal, contending it left NanoMech without enough money to pay outstanding fees incurred during the bankruptcy proceedings. The Wednesday order sets aside $55,726 of the settlement proceeds in escrow to pay any outstanding fees and requires NanoMech to pay all quarterly fees in full before its bankruptcy can be discharged.

Chief executive Jim Phillips retired weeks before NanoMech filed for Chapter 11 bankruptcy protection on April 15, 2019. NanoMech claimed $7.2 million in assets and owed nearly $19 million to its creditors, according to initial bankruptcy filings.

After the payment, Michaelson will release NanoMech of all claims and the company’s directors and officers will release Michaelson and others of all claims. The settlement resolves and eliminates disputes between the parties concerning the cause of the company’s bankruptcy.

The settlement agreement finds no fault with Phillips’ handling of the company or with any of the company’s directors, including Phillips’ retirement from the company. In earlier filings, NanoMech asked the court for permission to claw back more than $576,000 paid to Phillips as part of a severance agreement.

NanoMech said in earlier court filings that certain stakeholders had raised questions about Phillips’ leadership and actions as CEO. NanoMech said its investigations show Phillips spent company funds on personal expenses, including lavish trips, and also awarded himself a compensation package the company could not afford.

Phillips argued through court filings that the trips were all legitimate and that NanoMech’s allegations are gross mischaracterizations of the truth or outright fabrications.

In a second order on Wednesday, Judge Dorsey gave the OK for NanoMech to sell back 7.3 acres the company had purchased at 2447 Technology Way in Springdale to the Springdale Public Facilities Board. In recent court documents,

NanoMech has asked to sell the land back for $54,825.

The board is exercising an option to buy back the property at its initial sale price. The board sold the land to NanoMech in 2013.

Earlier in the bankruptcy proceedings, NanoMech argued that it could get more money for the property if it sold it on its own. In more recent filings, NanoMech said the sale was fair, equitable and in the best interest of the company.

NanoMech was founded in 2002.

In late July, the court approved the sale of most of NanoMech’s assets free of liens and other legal encumbrances to P&S Holdings for $8 million. The sale closed in early August.

P&S is a subsidiary of Houston’s Vinmar International Ltd., a global marketing, distribution and project-development company serving the petrochemical industry.