See the Stone Connection Docsheet™ Report for subsequent developments in the Stone Connection bankruptcy proceedings.

Stone Connection, Inc. (“Stone Connection” or the “Debtor”) filed a petition on September 28, 2009 in the Bankruptcy Court for the Northern District of Georgia (case number is 09-85337) for relief under Chapter 11 of Title 11 of the United States Code.  The case has been assigned to Judge Joyce Bihary.  The bankruptcy petition was signed by Barry W. Robinson as president of the Debtor.  The Debtor’s bankruptcy counsel is G. Frank Nason, IV of the firm of Lamberth, Cifelli, Stokes Ellis & Nason in Atlanta, Georgia.

Background of the Debtor

Stone Connection is headquartered in Norcross, Georgia with offices, a warehouse, and a distribution center at 3045 Business Park Drive, Norcross, Georgia 30071 (the “Headquarters”).  Stone Connection’s First Day Motions included the following description of its business:

Debtor is one of the largest distributors of natural stone slabs and tiles for interior design and construction in the southeast. The Debtor offers a range of products drawing on a global network of quarries, processors, and distributors.

Trade Debt; Secured Debt Picture

Consistent with its description of a global network of suppliers, the Stone Connection’s list of top 20 unsecured creditors is heavily populated with foreign suppliers.  Out of the Stone Connection’s 20 largest unsecured creditors, fourteen have addresses outside of the United States (Brazil (11), Italy (2) and Switzerland (1)).  See complete list of the “Top 20 Unsecured Creditors” below.

Stone Connection’s only secured creditor is Wachovia Bank (now part of Wells Fargo & Company).  The Stone Connection’s outstanding secured loans are limited to $1,452,798 due under a term note and $240,000 under a swap agreement.

Target of the Bankruptcy – Lease Rejection

Stone Connection’s initial filings strongly indicate that a primary objective of the Stone Connection’s restructuring will be the rejection of the leases for 3 of its distribution centers.  The Debtor advised the court that “In addition to the Headquarters, the Debtor currently has distribution centers in Fort Walton Beach and Orlando and Charlotte. As part of its restructuring, the Debtor vacated its location in Dallas and will vacate its locations in Orlando and Charlotte.”

As part of its First Day Motions, the Debtor moved for rejection of its lease in Dallas, Texas at Dallas Corporate Center #2, 11625 Columbia Center Drive.  The real estate is owned by ProLogis, a Maryland real estate trust.  The Debtor states in its motion to reject the lease that it has already vacated the premises.

Collateral Damage to Suppliers

There is no indication that trade debt represents a significant burden for Stone Connection.  It is more likely that any supplier non-payment of pre-petition claims is more likely the result of “collateral damage” from the objective of lease rejection.  The Debtor has not filed any motion for authority to pay the pre-petition claims of critical vendors or foreign vendors, as has become common in filings in Delaware and New York.  Even if such a motion had been made, compared to bankruptcy courts in Delaware and New York, Georgia bankruptcy courts are much less likely to approve such motions.

Suppliers may wish to focus on the remedies expressly afforded suppliers under the Bankruptcy Code, and most notably, a reclamation claim and a 503(b)(9) administrative priority claim.

Top 20 Unsecured Stone Connection Creditors

Stone Connection has listed the following creditors as being its top 20 largest unsecured creditors.  None of the claims were listed as contingent, unliquidated, disputed or subject to setoff.  Additionally, none of the claims were identified by type, although almost all would appear to be in the nature of trade debt.  Accordingly, the columns that would contain that information have been deleted.  The following list also does not include any creditor contact information that may have been included by the Debtor.

Name of creditor Complete mailing address including zip code Amount of claim
GMC SPA Via Fossone Basso n.8 19034 Isola di Ortonovo (SP) ITALY $161,105.95
Imetame Granitos Ltda. Rod. BR 101 – KM168 Rio do Norte 29901-981 Linhares ES BRAZIL $130,313.21
Pedras, Marmores e Granitos Rua Principal S/N Distrito de Gironda 29300-970 Cachoeiro de Itapemerim ES BRAZILl $72,365.87
Granite Quarries, USA 3045 Business Park Dr. Norcross, GA 30071 $48,276.28
Vitoria Stone Industria E Comercio Rua Atalydes Moreira de Souza S/N – Lt 11 e 12 29168-055 Serra ES BRAZIL $34,246.72
Savino Del Bene U.S.A., Inc. 5324 Georgia Hwy 85, #200 Forest Park, GA 30297 $34,042.70
Emigran Av. Marginal Luiza BodaniFarnetani S/N Dist Ind Sao Joano da Boa Vi SP, BRAZIL $33,866.33
Dane Si Spedizioni SRL Via C. Fiorillo 6 PO Box 94, 54036 Marina di Carrara ITALY $27,065.48
Crealogix Baslerstrasse 60 Postfach 112 Zurich, CH 8066 SWITZERLAND $24,981.02
Legora Export Av Mauro Miranda Madureira S/N 29,313-310 Coramara Cachoerio de Itapemirim ES BRAZIL $21,084.23
Vigui Granitos Ltda Rod. Santa Maria do Frade, Km 10.5 S/N – Itapemerim ES BRAZIL $16,342.53
Serra Norte Granitos Ltda. Rodovia Cachoeiro x Alegre S/N- Km22;CNPJ:02.372.580/0001- 73 Cachoeiro de ItapemirimES/BRAZILl $14,068.93
Emporium Granitos Do Brasil Ltda Rod. 482 KM 2,3Cachoeiro x Safra CNPJ 07.001.762/0001-51 Cachoeiro de Itapemirim ESBRASIL $13,893.08
Tracomal USA Corp. 3713 Vineland Road Orlando, FL 32811 $11,455.55
Marbrasa Parqie Industrial Melvin Jones S/N 29313-682 Cachoeiro de Itapemerim ES BRAZIL $10,049.90
Jacigua Marmores e Granitos Rod. Gumercino Moura Nunes S/N Km 08 – Santa Rosa CP 597, 29310-140 Cachoeiro de Itapemerim ES BRAZIL $8,984.63
Prologis 14100 East 35th Place Aurora, CO 80011 $6,300.51
Minaco do Brasil Av. Jeronimo Monteiro 1000-Ed Trade Center Vittoria ES BRAZIL $1,690.77
Cintas Corp #085 PO Box 210037 Dallas, TX 75211 $1,243.43
Cintas Corp #200 6300 Harris Technology Blvd Charlotte, NC 28269 $892.26

The Top 20 List does not include: (1) persons who come within the definition of “insider”; or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.

The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim.  It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed.  Creditors should always consult the official claims register.