Solavei to work through bankruptcy on tight budget
Solavei’s First Motions bankruptcy hearing appears to have taken place today, with the court concluding
As detailed in the Motion, the Debtor requires the use of Cash Collateral to continue its ongoing operations in the ordinary course of business, and in order to avoid disruption of such operations.
The Court finds and concludes that the Debtor and the estate will suffer immediate and irreparable harm if the relief approved hereby is not granted.
Based on the foregoing findings, it is hereby ORDERED as follows:
Motion Granted. The Debtor’s Motion is granted on an interim basis pursuant to the terms and conditions of this order (this “Interim Order”).
All objections to the Motion (if any) with respect to entry of this Interim Order are hereby overruled.
The terms and conditions of the order relate mostly to a budget, which Solavei is required to adhere to.
Subject to the terms and conditions of this Interim Order, the Debtor is authorized to use Cash Collateral in an amount not to exceed the total amount set forth in the Budget (the “Maximum Amount”) for use through the close of business Seattle time (the “Expiration Time”) on the date set for the Final Hearing.
In addition to the overall cap on how much money Solavei can spend between now and the final First Day Motions hearing, an effective monthly cap (directly tied into their generated revenue) also applies:
(Solavei’s) payment of any Fixed Expense (defined below) with Cash Collateral
(i) shall not exceed the corresponding expense line item set forth in the Budget for such Fixed Expense by more than ten percent (10%) in any one week and
(ii) the total amount of Cash Collateral used to pay all Fixed Expenses in any one week shall not exceed the total amount set forth in the Budget for all Fixed Expenses for that week by more than five percent (5%);
The Debtor may defer and pay a Fixed Expense budgeted for one week during any of the succeeding weeks so long as the cumulative expenditures from the Petition Date through the week when such deferred payment is made do not exceed the cumulative budgeted amount:
(i) for such Fixed Expense line item by more than 10% and
(ii) for all Fixed Expense line items by more than 5%.
The Debtor’s total actual expenditures on all Variable Expenses during any week shall not exceed the Budgeted amount of all Variable Expenses for such week by a greater percentage than the actual Net Revenues for the preceding four weeks, cumulatively, exceed the Budgeted amount of Net Revenues for the
preceding four weeks, cumulatively.
For purposes of this paragraph, “Variable Expenses” means the following specific line items in the Budget: T-Mobile, Commissions, 3Ci, Merchant Solutions, NCO, Other, and Taxes and “Fixed Expenses” means all line items in the Budget that are not Variable Expenses.
As far as Solavei’s affiliates go, their commissions are counted as “variable expenses” above. Solavei is restricted to not paying them (in addition to their other creditors) more than the company has brought in over the four weeks prior to the payment.
Opus bank are playing a large role in overseeing the budget and have been appointed Solavei’s defacto bankruptcy accountants:
Without Opus Bank’s prior written consent and subject only to subsections (a) through (c) of this section, the Debtor is not authorized to make any expenditures except in accordance with the Budget and this Interim Order and for fees of professionals retained pursuant to terms set forth in further orders of the Court.
With prior notice to and/or approval of Opus Bank, (Solavei) may reallocate payments from cash collateral among Budget line items (other than adequate protection payments to Opus Bank).
The Budget may be amended from time to time with the written consent and/or at the request of Opus Bank, provided that such amended Budget shall be in a form and substance acceptable to Opus Bank, in its reasonable discretion.
In the event of any material breach or default by the Debtor under the terms of this Interim Order, Opus Bank shall be entitled to a hearing on shortened
Opus Bank appear in Solavei’s Chapter 11 bankruptcy filing as a creditor with a secured claim. Solavei currently owes them $4.8 million dollars.
It’s worth noting that keeping within the interim order budget appears to be do or die for Solavei, with the company notifying the court that
it is unable to obtain financing and, except Cash Collateral, has no other source from which to fund the budgeted expenses necessary to preserve and protect the
assets of the estate.
Prior to filing for bankruptcy, Solavei had secured $10 million from Opus Bank, subject to release if the company could raise further capital. Solavei failed to raise this additional capital however, and the money was returned to Opus.
Much of Solavei’s being able to restructure itself and pay off their current $63 million in debt hinges on it’s affiliates being able to successfully continue to market the company’s services. Given the recent ~37% commissions cut Solavei affiliates took earlier this year though, there’s an air of uncertainty over how things are going to pan out.
Ultimately if sales drop and Solavei finds its operational expenses exceeding the past four weeks revenue taken in (thus being unable to pay their affiliates), things could get really messy.
BusinessForHome were first to break the Solavei bankruptcy story and, nestled between the “everything will be fine” spam and vulture-like recruiting efforts of affiliates in rival MLM companies, some interesting initial reactions can be found:
Solavei have change the comp plan 3 times! Anytime a company changes there comp plan so many time in less the 12 Month means trouble.
Thousand of people use to make $1,000.00 and now making $200.00 or Less. This company will keep spiraling down to it’s death and keep lying to it’s customers!
under the old comp plain I would be making over $1000 a month now.
But, I have to look beyond that to long term residual income. I need a company that can survive the long haul.
I’m willing to sacrifice short term gain for long term prosperity. What happened yesterday is EXACTLY why I love this company and our leadership.
Seriously, they generate that much money and still need to reorganize. I don’t think I will trust their future plans if they cant manage the money that is coming in, if they cant manage the present how can they manage the future of this company.
Not surprised. This is a bankruptcy. They can recover. They won’t look out for you.
no matter how they try to sugar coat it, Solavei has been dying a slow death. I have been with Solavei since day 1. I am a founding member and I was at the official launch in Seattle.
The fact is, there will always only be the big 4 wireless companies. Everyone else will only be trying to be re-sellers of the major services of either AT&T, Verizon, Sprint, T-Mobile.
It doesn’t take much insight to see they are on life-support. It’s just a matter of time now..
I could see the writing on the wall many months ago when they made tons of changes that negatively impacted customers including the pay plan changes and the as well as the service plan changes.
My son was a thousandaire with Solavei and it was taken away.
After all the comp plan changes and downgrading thousandaires, it made Solavei unattractive, this was bound to happen.
Please explain how Chapter 11 is a good thing, if you can not pay your bills you go to chapter 11, so how is it a company with so much growth is having trouble paying bills.
Looking forward, a final hearing date for the First Day Motions has been set for July 11th. Till then, Solavei are bound by the terms of the interim order.
Footnote: The above information was sourced from an order that appears on the bankruptcy docket as having been received and “forwarded to chambers for Judge’s signature”.
It appears to have been drafted by Solavei’s attorneys, Bush, Strout and Kornfeld, presumably after the hearing took place.
I don’t foresee any issues with the Judge signing the order, but nonetheless I’ll make a separate note if a signed copy of the order appears on the docket.