Durr Mechanical Construction, Inc. – Mechanical Contractor Files Chapter 11, States $122mn in Unpaid Debts Have Run DMC into Liquidation Process

December7, 2018 – Privately held Durr Mechanical Construction (“DMC” or the “Company”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York, lead case number 18-13968 [Docket No. 1]. The Company, a mechanical contractor specializing in the installation, rigging, setting, assembly, alignment and grouting of assorted process and power equipment, is represented by Adam P. Wofse of LaMonica Herbst & Maniscalco. 

 

DMC’s Petition notes between 200 and 1,000 creditors; estimated assets between $100 million and $500 million; and estimated liabilities between $50 million and $100 million. Documents filed with the Court list the Company’s three largest unsecured creditors as (i) Amquip Crane Rental LLC ($2,290,147.61 disputed trade claim), (ii) Analytic Stress Relieving, Inc ($296,294.75 disputed trade claim) and (iii) Apache Industrial United, Inc ($516,680.50 disputed trade claim). Court documents also state that during 2016 and 2017 DMC’s gross sales exceeded $54,600,000 and $197,860,000, respectively. 

In a declaration in support of the Chapter 11 filing (the “Durr Declaration”), Kenneth A. Durr, DMC’s President and Treasurer of Durr Mechanical Construction states that the, “Debtor requires the benefit of the automatic stay and powers afforded to a debtor in possession so as to adequately operate its business in a wind down fashion to close out jobs, and prosecute its valuable Affirmative Claims [described below]. This chapter 11 filing seeks to protect the value of the Debtor’s business for all of its constituencies. After careful consideration, and after exhausting all available remedies outside of a chapter 11 filing, DMC has determined that it requires the protection offered by chapter 11. DMC intends to use the chapter 11 process to stabilize its limited operations and develop a reorganization through an orderly liquidation plan that will preserve value for all of its creditors and interest holders….DMC believes that based upon the current valuation of its assets, there will be funds sufficient to make a distribution to unsecured creditors.”

Events Leading up to the Chapter 11 Filing

The Durr Declaration details the impact of its inability to collect an estimated $122mn in amounts due and owing in respect of three important contracts and the impact of that failure on its liquidity and further contractual relationships. The Durr Declaration details, “DMC has been experiencing severe cash flow issues primarily as a result of the failure of the two owners and one equipment manufacturer of three projects to timely pay—and their abject bad faith refusal to pay—amounts due and owing to the Debtor in connection with those projects. Specifically, the equipment manufacturer and owners who have failed to pay are (a) Enexio US LLC (‘Enexio’), (b) PSEG Fossil, LLC (‘PSEG’), and (c) the New York City Department of Environmental Protection (‘NYC-DEP’) (collectively, Enexio, PSEG and NYC-DEP, the ‘Obligors’). The aggregate sum due to the Debtor from these (mostly) completed projects (and affirmative claims for damages as further set forth below) exceeds $122 million. As of the Petition Date, the Enexio and PSEG projects are 100% complete and the NYC-DEP project is 98% complete…..DMC’s cash flow problems negatively affected its operations because certain subcontractors, vendors and/or creditors have (a) filed liens against projects, (b) filed claims against payment bonds, and/or (c) commenced litigation against DMC for nonpayment, all further exacerbating DMC’s distressed financial situation.

DMC is presently prosecuting litigation against Enexio and PSEG, respectively, to collect the funds justly owed the Debtor. With respect to the claims against NYC-DEP, claims have been filed with the NYC Comptroller’s office. All of the litigations against the Obligors will continue to be prosecuted in earnest in the Chapter 11 case. However, as mentioned above, given the extraordinary failure and refusal of the Obligors to pay their obligations to DMC, DMC was forced into this distressed situation, and is constrained to reorganize via an orderly liquidation in order to be placed in a position to address its financial obligations and affairs….Without a breathing spell provided by the Chapter 11 filing, the aforementioned creditor actions would pose a serious threat to the Debtor’s immediate viability (including its ability to prosecute the Affirmative Claims) to the detriment of all of its constituencies, including its employees.”