Next week in bankruptcy, vitamin and supplement supplier Natrol Inc. and its lender, Cerberus Business Finance LLC, will go to court to settle a dispute over control of the company.
Last month, Cerberus asked Judge Brendan Shannon of the U.S. Bankruptcy Court Wilmington, Del., to oust Natrol’s current management, replacing executives with a Chapter 11 trustee.
Court papers show Cerberus, owed $75 million, hired investigators who turned up what it says is evidence of, at best, a leadership in disarray and lacking “the business judgment and acumen to run the enterprise going forward.” At worst, the lender says, there’s evidence of “serious misconduct” that resulted in more than $25 million being siphoned out of Natrol in a scheme tainted with cronyism and nepotism.
Natrol Chief Executive Mesrop Khoudagoulian said the breakdown in the company’s relationship with Cerberus is a result of “misunderstandings, miscommunications and misperceptions.”
A Natrol spokeswoman said Cerberus’s efforts to appoint a Chapter 11 trustee are part of a strategy to gain leverage in the reorganization process.
For Cerberus, which has a reputation as a savvy, sophisticated and experienced lender to troubled companies, Natrol’s case marks the first time it has been driven to the point of calling for the appointment of a Chapter 11 trustee to take over the handling of a business, its lawyers said.