SC gun distributor forced into bankruptcy after mishandling of funds
CHAPIN, S.C. (WIS) - Ellett Brothers LLC has filed for Chapter 11 bankruptcy and expects to close its doors permanently after the company mishandled money, according to court documents.
Ellett Brothers LLC is a gun distributor that has been operating in Chapin since 1933. Employees of the company received the news that they would be laid off due to the company losing a substantial amount of their assets and business value despite an industry wide increase in sales in 2012 and 2013.
We spoke with David Knight, the Mayor of Chapin who says this will impact the town greatly.
“The name Ellett Brothers and the town of Chapin are synonymous. I believe Ellett Brothers probably put Chapin on the map. Major hole in this community, major impact, it really is devastating to a lot of people,” Knight said.
The lawsuit states Prospect Capital Corp. collectively loaned Ellett Brothers, and other subsidiaries, $160 million in 2012 and 2013. Additional loans were given to Ellett Brothers from other lenders as well.
According to court documents, the money loaned to Ellett Brothers was not invested into the company but instead was used fraudulently to invest into another company, Wellspring Capital Partners IV, which specializes in buyouts, buy-ins, recapitalization, industry consolidation, going-private transactions, and middle market investments.
Ellett Brothers and several of its subsidiaries, including Evans Sports, Inc., Jerry’s Sports, Inc., Simmons Gun Specialties, Inc., Bonitz Brothers, Inc., and Outdoor Sports Headquarters, Inc., fraudulently invested a combined total of more than $188 million in 2012 and 2013, according to the lawsuit. More than $183 million went to Wellspring Capital Partners IV.
On December 31, 2018, Ellett Brothers and several of its subsidiaries defaulted on their loan from Prospect Capital. Wellspring Capital, knowing that they are unable to pay, is now threatening to put the companies into bankruptcy.
According to the lawsuit, Prospect Capital is also seeking action against Wellspring Capital claiming that through their “gross mismanagement of the borrowers,” that they “repeatedly and recklessly induced Prospect to forbear” preventing it from enforcing its rights.
According to a layoff notification, the company is expected to close its doors no later than August 5.
Chapin Mayor David Knight says a job fair to help those laid off from Ellett Brothers will be held on July 25th at the Chapin Town Hall's community room .
They are still working on times, but will release more info soon.
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