PSLS  •  News

Loot Crate Files Chapter 11, Lays Off Most of Its Staff

Nerd subscription box provider Loot Crate announced back on August 12, 2019 that it was selling “substantially all of its assets to Loot Crate Acquisition LLC.” As part of the sale agreement, Loot Crate filed for Chapter 11 bankruptcy and reorganization. In its press statement, CEO Chris Davis “emphasized that employees and customers should not notice any difference in operations as a result of the filing or during the sale.” Mr. Davis went on to say that customers will still receive crates and employees will still be paid.

On the surface, this may sound harmless. The company got in over its head and now it has to sell its assets to keep operating. Also, it appears that it is selling its assets to itself or a subsidiary. However, LA Times pulled actual numbers as to what is going on behind closed doors, and it’s a mess.

For starters, employees will notice a difference in operations, as nearly 50 people were laid off without warning last week. Roughly only 60 full-time staffers remain.

In addition, customers will notice or have noticed a problem, as LA Times reported that the company “hasn’t shipped goods tied to $20 million in sales.” Sadly, that’s not the company’s only financial woe. Its merchant processor (for credit cards, etc) is withholding money customers have paid. Loot Crate owes over $30 million in trade debt, and it’s behind on nearly $6 million in sales taxes.

This is not a simple reorganization. In all likelihood, Loot Crate will never recover.

Loot Crate’s problems began when it defaulted on a 2017 loan from Breakwater Management. The company refinanced it with another loan in August 2018. Money Chest LLC has agreed to buy that loan, as well as provide a bankruptcy loan of $10 million. A firm connected to Money Chest and “one of the largest and best-run collectible manufacturers and distributors in the world” (most likely Loot Crate Acquisition LLC) have placed the stalking-horse bid on these assets up for sale.

Were you a Loot Crate subscriber? Are you going to attempt to keep your subscription?