STONINGTON — The Island Employee Cooperative has filed for Chapter 11 bankruptcy relief to restructure its debt — a move done in part because the cooperative couldn’t reach a settlement agreement with the previous owner, who is a lien holder, according to the cooperative’s Operations Manager Ben Pitts.
“There’s a question of how much the business is worth,” Pitts said.
The cooperative, formed in 2014, owns three stores on the island: Burnt Cove Market, V&S Variety and The Galley.
The entities were previously owned by Vernon and Sandra Seile. The American could not reach the Seiles for comment before press time.
Pitts said the business is in good shape financially.
“We filed with bills paid up current and money in the bank,” Pitts said. “We’ve got the financing with our three major creditors set and ready to go — that was done before we filed.”
Because of the volume of capital improvements that have been done and need to be done, the cooperative is questioning the value of the property, Pitts said.
“The senior lenders asked us to stop paying him,” Pitts said. “His balance has accrued to $1.9 million.”
Pitts attended a recent joint meeting of the Deer Isle and Stonington select boards. He told the boards that the stores are not “cash flow-positive five months out of the year.”
According to a copy of the bankruptcy filing, the IEC is disputing a $90,000 inventory loan owed to Seile on top of the $1.9 million. The cooperative is also disputing a $48,332.50 Affordable Care Act penalty owed to the Internal Revenue Service, according to the filing.
The IEC is represented by Portland law firm Bernstein Shur.
IEC has a description of a worker co-op on its website:
Cooperatives, which come in many shapes and sizes, are businesses formed by groups of people who voluntarily develop, jointly own and democratically control an enterprise to meet their common needs.
“In a worker co-op, the workers can own one share of the business, and only one share,” the IEC said. “Owning that share gives those workers certain rights in the corporation, like a vote to elect the board of directors, to approve a budget and to set the strategic direction of the company. Being an owner also gives them an equitable share of the profits.”