A federal bankruptcy court judge has appointed a trustee to run Yacht Path International, the yacht-transport company that filed for involuntary bankruptcy protection in March.
In bankruptcy cases, a trustee is an independent party that assumes day-to-day control over a company—in this case, taking control from Yacht Path International’s owner. Since Yacht Path International filed for Chapter 11, the trustee will decide how best to continue the reorganizational process, such as paying the secured creditors. While it is too early to determine what will happen with Yacht Path International, in some bankruptcy cases, trustees decide the best course of action for all parties, including the debtors, is to sell the business.
The trustee’s appointment comes after a petition filed with the court earlier this month by five customers of Yacht Path International. They claimed that the company committed civil fraud, alleging that Yacht Path International knew it was in serious financial trouble when it took their advance payments to have their yachts shipped. Those yachts are now sitting in a variety of ports around the world, with liens filed against them by the shipping company that owns the vessels upon which they were scheduled to be transported by Yacht Path International.
Yacht Path International is not the only yachting firm of its type that doesn’t own the ships it uses. Indeed, a handful of companies have been operating under it for many years. However, in this case, the five yacht owners referenced above reportedly provided payment to Yacht Path International, but Yacht Path International did not pay the shipping company. Dennis Cummings, the president of Yacht Path International, claimed that his firm was unable to pay because of a failed merger and a writ of garnishment placed on its bank accounts, the latter following an earlier lawsuit settlement. Regardless, the company owning the ships refused to take on the yachts, and the yachts cannot be shipped by anyone until it is paid.
In related news to the bankruptcy, in April Yacht Path International’s total debt was re-stated as $21 million, up from the initial claim of more than $7.5 million when it filed Chapter 11 in March. The new figure includes $8 million owed by Unity Shipping Lines, a sister company to Yacht Path International, and debts owed by two other sister companies, these being Unity Marine and Yacht Path Palm Beach. The four companies all filed for Chapter 11 and are being jointly administered by the trustee. The assets that Yacht Path International initially claimed remain the same, however, a total of $343,000.