BY ROGER SMITH
MOUNTAIN CITIZEN
PIKEVILLE — Martin County manufacturer Boxvana is facing an uncertain future. The company filed for Chapter 11 bankruptcy protection last week, effectively evading eviction from its location in Debord by the Martin County Economic Development Authority for unpaid rent and penalties.
Boxvana, whose principal operations consist of constructing modular living and working structures using Lite Pan®, filed the bankruptcy action Aug. 2 in U.S. District Court in Pikeville, the same day the EDA filed an eviction action against the company in Martin District Court.
Harrison Langley, Boxvana president and manager, said his company had fallen behind in paying vendors and its landlord and filed the bankruptcy to preserve its assets.
“The decision to file for Chapter 11 protection was a difficult step for us to take,” Langley told the Mountain Citizen. “We carefully considered what effect such a reorganization would have on our employees, customers, creditors, vendors and the community and decided that, on balance, this was the best course of action available to us at this time.”
In its eviction complaint, the EDA demands possession of the 55,000-square-foot building that Boxvana leases at the Honey Branch Industrial Park for nonpayment of $192,213 in rent and penalties. The EDA contends that as of July 26, Boxvana owed back rent and late fees of $66,171.87, penalties for 2021 of $68,749.98, and penalties for March-July 2022 of $57,291.65.
Boxvana listed its top 20 creditors with the largest unsecured claims totaling $710,497 in the Chapter 11 filing, which did not include the $192,213 owed to the EDA.
“It’s my understanding that we’re prevented from doing anything further at this point because of the bankruptcy stay that is in force,” EDA chair James Ayers told the Mountain Citizen. “So, this will have to play out in bankruptcy court.”
Boxvana leased the space July 16, 2020, for $5,729.17 per month beginning Feb. 1, 2021, and ending Jan. 21, 2022. The monthly rent increased to $11,458.33 starting Feb. 1, 2022.
In the lease, Boxvana agreed to create and retain 60 new full-time jobs by Feb. 1, 2021 (tier 1 jobs) and 110 new full-time jobs by Feb. 1, 2022 (tier 2 jobs). If Boxvana failed to meet the tier 1 benchmark, the company would pay an additional $68,749.98 in six equal monthly installments beginning March 1, 2021. If Boxvana could not meet the tier 2 benchmark, the company would pay an additional $68,749.98 beginning March 1, 2022.
When Boxvana did not meet the tier 1 benchmark in 2021, the EDA initiated talks with company officials in November 2021, attempting to resolve the “non-compliance” issues. Boxvana did not meet the tier 2 benchmark Feb. 1, 2022, and the EDA discussed taking legal action.
In an April 5 meeting, the EDA paused plans to file an action and agreed to discuss a lease amendment with Boxvana.
“It’s really unfortunate,” said Ayers. “We’ve tried a long time to work this out. I think everybody remembers the meeting that we had in April. We had a lot of community support for Boxvana – or more for the employees of Boxvana than the company itself.”
According to Ayers, the two entities negotiated an amended lease following the April meeting, but Boxvana did not execute the lease.
“That went back and forth for a couple of months,” explained Ayers. “They did state in an email correspondence that they accepted the terms of the amended lease, but it comes down to they never did sign it. Then we didn’t hear anything back from them the last couple of weeks and were forced to move forward with the eviction because we’ve got an asset we need to protect. We have to ensure the building is protected.”
Boxvana has not made a payment to the EDA this year.
“Ultimately, we’ve gone above and beyond, in my opinion, what anyone else would have done,” said Ayers. “We’ve probably been too good to them in some regards.”
Ayers did not know the status of Boxvana’s current workforce.
“The times I’ve been by, it doesn’t appear a lot is going on there,” he said.
According to Boxvana’s Chapter 11 filing, the company currently employs nine salaried employees and three hourly employees, who are paid biweekly with an approximate gross payroll of $29,000 every two weeks. Boxvana has fallen behind paying employee withholding taxes and owes the U.S. Internal Revenue Service $235,000 and the Kentucky Department of Revenue $51,000, as well as lesser amounts to the Martin County Occupational Tax Office and Ohio and Pennsylvania taxing authorities.
Boxvana opened shop in Martin County in early 2020 after receiving Kentucky Economic Development Finance Authority approval for a $400,000 tax credit across 10 years for $1.7 million in startup costs (defined as eligible costs) with a projected total investment of $2.4 million. The tax credit was contingent on the company reaching an initial immediate job target goal of 10 positions and 25 positions within 10 years, paying an average hourly rate of $23.50 across those jobs along with fringe benefits including health insurance and a 401(k) retirement plan.
The bankruptcy court has scheduled a meeting of creditors Sept. 1. Creditors (except a governmental unit) have until Oct. 11 to file a proof of claim. Governmental units have until Jan. 29, 2023.
Ayers and the Martin County EDA board will conduct a special meeting at 6 p.m. Wednesday (Aug. 10).