For Peter Von Hopffgarten, the last nine months were an eternity.
The owner of Pool & Spa Depot, which recently emerged from Chapter 11 reorganization, had to endure false rumors from the competition, misinformed customers, a demanding bankruptcy timetable and, in essence, losing control of his company.
Though the Antioch, Tenn.-based firm now is “leaner and meaner” after restructuring its debt, business model and management, the experience was one Von Hopffgarten won’t soon forget.
“It was not pleasant,” he said. “There was nothing fun or gratifying about it. Even the effective date in early August, which should have been a champagne moment, wasn’t really that. I feel for anybody who has to go through something like this.”
Like many pool companies nationwide, Pool & Spa Depot’s revenue began to slide at the start of the recession. Though management took steps to reduce expenses, the balance sheets never quite returned to positive territory.
Then, in October 2010, the bank called its note, and Von Hopffgarten had no choice but to file for bankruptcy.
“It wasn’t going to get better,” he said. “It was only going to get worse.”
However, on the eve of filing, Von Hopffgarten did something that he believes saved him, and the company, untold hardship. He walked into his office, closed the door and proceeded to contact each one of his creditors within the industry.
“I felt personally attached to the situation, and personally responsible to some degree,” he said. “So I wanted to give them the heads-up to what was happening. I told them what we were doing and how to reach me. And I believe that really impacted the support we received through the process.”
Legal experts agree. According Carl H. Starrett, an El Cajon, Calif.-based attorney, communication is the single most important consideration when filing Chapter 11 bankruptcy.
“The biggest question in the creditor’s mind is, ‘What is going to happen to the money that is owed to me?’” Starrett said. “So the key selling point [for the debtor] is that everybody is better off if you work with me and approve and vote for my plan. … And I can still be your customer, and you can be assured that I’m going to stay in business and so forth.”
In Von Hopffgarten’s case, that’s precisely what happened. After spending the remainder of the fall cobbling together budgets, cutting expenses and developing feasibility reports, he began the process of sorting through creditors and classifying his debt.
And he was able to continue doing business with every one of his vendors, Von Hopffgarten said, albeit on a cash basis.
“We didn’t have the door slammed in our face one time,” he recalled. “I was really in fear that they were going to tell me to go pound sand. But the most surprising component to me was how great the industry vendors were to work with.”
By the spring, Pool & Spa Depot’s plan was on track. And because Von Hopffgarten had fortified his business relationships, he was optimistic about the final stage — a Planned Confirmation Hearing in which all creditors vote on the company’s reorganization plan submitted before the court.
Fortunately, support for the plan was unanimous. And in a sense, that has set the tone for Von Hopffgarten and Pool & Spa Depot to move forward, while never losing sight of where each has been.
“What probably resonates more than anything is that it wore on me personally, feeling a sense of failure or that you’re less than,” he added. “But I realized this was not all on me, and that I wasn’t the only person in the history of the world to go through this. It’s something that happens.
“What’s really important now is that the future is bright,” he added. “We have a positive outlook.”
Pool & Spa Depot was No. 49 on this year’s Pool & Spa News Top 50 Builders list with just over $3.5 million in residential construction revenue.