Deal reached to revive failed linen company

Deal reached to revive failed linen company

A Georgia-based medical linens laundering firm is slated to buy
the bankrupt West Coast Linen for $4.1 million, following
bankruptcy court filings last month.
A Georgia-based medical linens laundering firm is slated to buy the bankrupt West Coast Linen for $4.1 million, following bankruptcy court filings last month.

Richard Schwalbe, the court-appointed trustee for Sausalito-based Lohrey Enterprises, which operated Gilroy’s 100,000-square foot West Coast Linen plant, announced the agreement Monday. If all goes as planned, Georgia-based Angelica Corporation will purchase Lohrey’s assets following bankruptcy court approval in Santa Rosa on Jan. 22.

“It feels good to finally be able to get people back to work and get assets in hands of people who could actually use them,” Schwalbe said. “Boy, I wish it hadn’t taken that long.”

It was unclear how many jobs the deal would bring to Gilroy.

Alpharetta, Ga.,-based Angelica delivers textile rental products and linens to healthcare professionals and patients. It has more than 30 markets across the United States. Company officials could not be reached for comment Tuesday, but Schwalbe said that company representatives have paid several visits to the Gilroy facility at 8190 Murray Ave.

Angelica was one of 38 prospective buyers of the Gilroy facility, which sits on 4.6 acres. About a dozen parties traveled to Gilroy to see the plant, Schwalbe said. Lohrey had been in talks with Angelica for about a year, he said.

West Coast Linen closed in late November 2008 after filing for bankruptcy on Oct. 17 of that year. Although Schwalbe was not certain about the issues that prompted Lohrey Enterprises to file for bankruptcy, he said it appeared that they actually suffered from having “too much business.”

The company had 60 customers, including 48 hotels and 12 hospitals, one of which was Kaiser Permanente, he said. However, the company was short on equipment to handle all those clients, he said.

The company owes creditors about $44 million, Schwalbe said. That includes 500 employee claims, totaling about $700,000, as well as claims from other entities including Las Vegas, Nev.,-based Vestin Mortgage and other financial firms. Employee claims range anywhere from about $200 to $6,300, Schwalbe said, although he indicated that most averaged around $1,000.

It will be at least a month before the bankruptcy court determines which creditors are paid and how much they will receive, Schwalbe said, although he hoped that would happen sooner rather than later.

“In theory, there could be a big fight over a lot of the money,” Schwalbe said.

Despite complaints from employees in 2008 that company representatives had threatened to turn over undocumented workers to the federal Immigration and Customs Enforcement if they complained about not receiving a paycheck, Schwalbe said all the claimants’ files contained copies of drivers’ licenses and social security numbers. Officials with the federal Department of Industrial Relations could not be reached for comment Tuesday.

Schwalbe expressed relief that an agreement finally appears to be close at hand. This case has taken a particularly long time because Lohrey Investments, a real estate holding company that was tied to Lohrey Enterprises, filed for bankruptcy just a couple of months after Lohrey Enterprises. As a result, there was an attempt to consolidate both bankruptcies, he said.

Schwalbe noted that he made the public announcement Monday in hopes that a higher bid would come in between now and Jan. 22. However, he said that had not happened as of Tuesday afternoon.

While he said there is no guarantee that former Lohrey employees will be hired on by Angelica, he personally felt that they would be prime candidates for any new jobs.

“If I’m a hiring manager, I’d prefer to find people who are experienced,” Schwalbe said.

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