Stonepath Group creditors file involuntary Chapter 7 case

By Caroline Salls

Pittsburgh, May 10 - Stonepath Group Inc. had an involuntary Chapter 7 bankruptcy case filed against it on May 8 in the U.S. Bankruptcy Court for the District of Delaware, and the petitioners requested immediate appointment of an interim trustee, arguing that management has abandoned the company.

The petitioning creditors are Spherion Corp., Fort Lauderdale, Fla., which holds an $811,872 claim against Stonepath; Custom Transfer Inc., Long Prairie, Minn., with a $206,698 claim; and Overbye Transport Inc., Lakeville, Minn., with a $36,543 claim.

The petitioning creditors said the interim trustee should be appointed because Stonepath's senior secured lender Mass Financial Corp. has already taken over control of the company's board of directors and has refused to respond to petitioner inquiries.

In addition, the petitioners said Stonepath's chief financial officer recently resigned, the company is in default on its $5.8 million Mass Financial credit facility, Stonepath has admitted to being unable to afford to hire auditors because of its poor financial condition, the company has not filed its most recent 10-K annual report with the Securities and Exchange Commission and Stonepath has been delisted from the American Stock Exchange.

In addition to public acknowledgements of its dire financial straits, the petitioning creditors said Stonepath employees have said the company's strategy at this point "is to simply run down its assets until there is nothing left."

In its most recent 10-Q filed in November with the SEC, Stonepath said it had $98.92 million in total assets as of Sept. 30, 2006 and $81.17 million in total liabilities, including $20.2 million in short-term debt, $4.01 million in long-term debt, $16.09 million in liabilities held for sale and $30.93 million in accounts payable.

Stonepath is a Seattle-based logistics company. Its Chapter 7 case number is 07-10643.

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