A Virginia bank has filed a $40 million-plus lawsuit against a hardwood producer that had a heavy business footprint throughout West Virginia before abruptly closing its doors last month, saying the company owes it that much in unpaid loans.
United Bank filed the federal lawsuit Tuesday against Grant County-based Allegheny Wood Products Inc. and two affiliates, looking to collect $40.5 million and seeking appointment of a receiver to control the defendants’ assets and operations.
The lawsuit in the District Court for the Northern District of West Virginia marks the second federal lawsuit against Allegheny Wood Products filed in a three-business day span in response to its sudden closure late last month.
The other lawsuit alleges in a class action that Allegheny Wood Products failed to provide federally required 60-day notice of mass layoffs caused by the closure and seeks 60 days of pay and benefits for aggrieved employees, a civil penalty for each violation and attorney fees.
WorkForce West Virginia Acting Commissioner Scott Adkins told the West Virginia Senate Finance Committee last Saturday the state expects about 900 workers to be impacted by Allegheny Wood Products’ sudden closure.
Allegheny Wood Products president John Crites II has not responded to requests for comment, including a request for comment on United Bank’s lawsuit.
United reports liens and interests in sawmill equipment
United Bank says in its complaint Allegheny Wood Products executed a $40 million promissory note in 2005 payable to the bank. United says a March 2022 term loan agreement designated $15 million as a term loan and $25.4 million as a line of credit, with a $15 million promissory note to support the term loan.
Crites guaranteed the obligations under loan documents effective December 2019, according to the lawsuit. The complaint says United isn’t going after Crites for breaching the guaranty at this time but reserves all rights to pursue such claims.
United and the defendants — Allegheny Wood Products, Allegheny Wood Products International Inc. and Allegheny Wood Timber Products LLC — extended the maturity date of the notes to Sept. 30, 2023 effective July 31 of that year, per the lawsuit. They extended the maturity date — to Jan. 31, 2024 — again in December, the lawsuit says.
The Allegheny companies executed security agreements granting liens and security interests in accounts receivable, equipment and all lumber and log inventory, according to the complaint.
United says those items included all Allegheny equipment at their sawmill facilities in Preston, Webster, Mercer, Raleigh and Greenbrier counties, as well as a sawmill complex in Clarion County, Pennsylvania and another facility in Halifax County, North Carolina.
United says the parties entered into a forbearance agreement, effective Feb. 23, in which the defendants acknowledged the loans had matured and were in default, and consented to a receiver appointment.
The bank contends the defendants started a failed months-long marketing and sales process in mid-to-late 2023 to sell their businesses. The defendants told United on Feb. 20 the last potential buyer of the operation as a going concern confirmed it was no longer interested in buying their operations — 20 days after the notes matured United demanded payment in full, according to the bank.
Bank says it froze all AWP deposit accounts it held
United says the defendants’ ceasing of operations and employee terminations on Feb. 22 came a day after United placed an administrative freeze on all their deposit accounts. The bank says a receiver could use proceeds from collateral and other assets to satisfy related expenses, including secured debt United says the defendants owe to United.
United says a receiver may also be able to sell portions of the defendants’ operations to third parties, which the bank said could be the only way to allow some of the companies’ workforce to return to employment.
United said it identified Chris Deweese, a certified public accountant at ÂÒÂ×ÄÚÉä-based accounting firm Suttle & Stalnaker PLLC, as an “appropriate candidate†to be the receiver.
AWP head backed limiting worker injury damage recovery
Last year, Allegheny Wood Products withdrew an air quality permit application for a proposed log fumigation facility in Hardy County heavily opposed by residents there due to environmental health concerns.
Crites lobbied last year for legislation capping how much employees can recover as compensation for noneconomic losses from workplace injuries when their employer acts with “deliberate intent.†That legislation, 3270, became law despite opposition from advocates of miners and other workers. Crites said the legislation would eliminate false claims that he said drive up insurance and litigation costs.
