Krell Moves to new location

All- thanks for the responses. I have a set of 575 mono amps in for repair (on one unit) and an upgrade on both. They have been there since late March. Repeated emails go unanswered and calls to any number in their phone tree are met with a message that the called mailbox is full. If there are any dealers reading this thread please weigh in with any information you have since, as it has been pointed out, Krell seems to communicate with dealers much more than with customers. This has the earmarks of a bankruptcy not probate delays, but if anyone has ANY information about the status at Krell, it would be greatly appreciated. 

To thecarpathian and hgeifman- thanks for your efforts and research, but I am a bit confused. I was under the impression Krell rented the building along with others and was not the owner of the structure. Hard to believe it was sold to a new buyer who couldn’t do anything including renting it until some issues were solved. That to me would suggest Krell did in fact own the business and it was therefore part of the probate issues. It was a large building with parking that apparently sold for $2.2 MM. seems like a fire sale price, although I don’t know the Orange CT market. 
 

I looker up  Will Buhler and JF Bicking. He is a managing Partner at the firm. They do strategic advisory work. These are guys that come in when a company is in bad shape  and generally try to either put lipstick on the pig to sell it , or look for ways to break it up and sell off parts in the hope the sum of the parts is greater than the whole. In some rare instances they can get the company back as a going concern but that outcome is unusual. These guys get a ton of money for their advisory services and generally a fee based on what the company or parts are sold for.  While I’d like to be encouraged by the communication from him to hgeifman, unfortunately I interpret it  as an email from the grim reaper. I truly hope I am wrong on this not just due to the equipment I have sitting with them from Q1 this year, but also for the venerable brand. Wonder if Dan and their son would consider merging the 2 companies. Somewhat different focuses for the entities but stranger things have happened. 
 

As always, ANY useful or insightful information on Krell would be appreciated. 

Well, it looks like our hopes for a Krell “reopening” as Will Buhler suggested in his communication to us on Audiogon are the of coal in our Christmas stocking. They have the same lame press announcement for months now on their revised website. I followed their instruction to contact the service at the new site and nada. Very unlikely we will see anything before January at the earliest. Not sure what is going on but I think they owe us with equipment  in for repair or upgrade more information. I don’t see the need for the news blackout. Surely there is more to communicate given the passing of time but what is that information. Common Will give us some Christmas hope! 

The case citation from jea48 is from 15 years ago and while it shows a litigious past for Krell, it has no bearing on the current situation. Interestingly, it put a value on Krell at $3MM in 2009 ( 40% was bought for $1.2MM). Doubt it is worth that much now. Buhler said a month ago there would be a press release the end of November . Clearly that hasn’t happened and as many have pointed out, the lack of communication by Krell and Bickering is very unusual and unprofessional. Furthermore, his choice of using Sterophile and a Krell enthusiast group as the points of dissemination for news on the company is just plain stupid. Why wouldn’t you issue a press release, post it on the new website, and then various groups would pick it up and transmit it?

Let me see if I can add some potential clarification to what the role of Buhler and his firm. They may have a venture capital arm, but Buhler is acting in an advisory capacity as a turnaround guy. As I stated in a prior communication that means he is either working to fix it or to sell it. Many in this forum has rightly stated that the longer this current malaise continues,  the lower the probability of recovery and the higher the probability of a simple salvage through liquidation. The liquidation value decreases with time as well since personnel assets have dispersed and brand equity has been diminished. It is unclear who hired Buhler, but whoever did should hold his feet to the fire and have him communicate with Krell stakeholders both more professionally and more frequently. Doubtful he is doing this as an act of charity by a committed audiophile, so he has a fiduciary responsibility to act in the interest of the debt holders ( those of us with product in at Krell fall into that category).

I am increasingly suspect of the viability of Krell as a going concern and also the probability I will get back my $20K amps. The next steps are just unclear at this point, but I appreciate much of the input from folks on this forum. Keep fighting the good fight. 

Jea48 I didn’t wanna make the communication on this form very personal since I didn’t want to come off as any sort of know at all. However, perhaps some of my work background will be appropriate and give some perspective on why I have made the comments i have. I ran a number of large consumer products companies earlier in my career. I tired of that and then did turnarounds for private equity and venture capital portfolio companies for over a decade. Subsequent to that I started a hedge fund focused on small ( under $1B market cap) public companies in some stage of turnaround. I took a number of client companies through bankruptcy. I have a pretty good idea of the situation if not the specifics facing Krell and Buhler. 
 

As I have outlined, there is much to be desired with the communication from Bicking. I realize Krell and Bicking are both private companies and won’t have the disclosure  mandates of public companies.. What I am about to write is based on some level of conviction of the situation at Krell despite a lack of knowledge of the facts. I have researched Bicking and there is no indication that they hold an equity position in Krell or any other company. They are strictly an advisory firm and as such they are likely trying to turnaround Krell. It is unclear who hired them or for that matter who they report to. I agree it is curious that Buhler used terms like “we” or “our firm” when referencing Krell but you need to understand I suspect he is the management of the company at this point probably largely through default. Again a suspicion on my part, but this has been going on so long that personnel has dispersed and he is of the last men standing at the company. While perhaps a bit sloppy, Buhler’s note to this forum was casual and not official so the terms he used are understandable. Nevertheless he has missed some self imposed deadlines for communication on the situation. Also while not mandated, in a situation of a consumer products company communication with “stakeholders” becomes paramount in preserving brand equity. 
 
While I am not at the point of suggesting Krell is a failed company it certainly would meet my definition of being in the “zone of insolvency”. I am not a lawyer either, but I have worked clients through the bankruptcy courts, and when a company finds itself in that situation the people running the company need to take care of the debtors first and the equity holders second. Basically they need to run the company so that debtors get their money or in my case my property back. Frankly anyone who has equipment in at Krell for repair, warranty or upgrade is supposed to get their equipment back since it isn’t part of the Krell estate. 
 

I don’t want to speculate on outcomes but even if Bicking is an equity holder in the company at this point I SUSPECT their focus to shift from protecting the equity holders interests to protecting the debtors interests. I agree this whole situation is odd and it appears Buhler has had a relationship with Krell for sometime. Given the financial trials and tribulations I am not surprised Bicking has had a relationship with the company for sometime. However based on what I have seen and on some likely assumptions, the nature of their advisory services  has probably changed over time.  Unfortunately not much we can do other than rely on the better Angels doing the turnaround.

Lynn_olsen is largely correct but bankruptcy is a bit more complex depending upon the state and the type of bankruptcy. Most bankruptcies start out as a Chapter 11 meaning they will get some money from an outside source in exchange for basically full ownership of the company. Then Krell in this case would settle the claims of it’s the debt holders with some of the cash infused for ownership of the company with the remaining cash going into future operations of the company. Most states want to get back pay to employees but that is limited in amount, duration of pay owed and the size (cash) of the estate. As for taxes, I suspect Krell has produced losses for multiple years and has a sizable NOL (net operating loss) which is a shield against future taxes  (largely at the federal and state level) and an asset of the estate. The other bankruptcy is called a chapter 7 proceeding which is basically a dissolution of the company under bankruptcy court procedures with the proceeds going to people the company owes money to which includes employees, vendors, secured debt holders ( generally a bank) and then to unsecured debtors. If there is sufficient cash after the bankruptcy action to pay off all the above, then the shareholders get the remaining cash. This whole process is somewhat more complex than that, but this is a quick overview of the rank order of payouts. I’m sure you’ve heard the phrase “Pennies on the dollar”. That is a reference to the fact that in most bankruptcies, most entities owed money get less than what they are owed and hence Pennies on the dollar.

A large percentage of companies that attempt a Chapter 11 actually wind up as Chapter 7’s in less than a year or so. As for those of us with equipment at Krell, it should not be considered part of the estate. We never transferred title to our assets and Krell is simply “holding” our amps, preamps, etc. However, getting them sent back to us will be a chore since cash will be at a premium and there likely is nobody there to send our equipment back to us other than a court appointed trustee who wants to get this off his or her plate as quickly as possible. Sending back 60 pound amps to Oregon or Mississippi will not be high on their to-do list.

This rather negative overview assumes Krell is going into bankruptcy - an event for which we have no actual knowledge. This was merely a response to Lynn_olsen response about payment priorities under a liquidation scenario. The other caveat here is that I am not an attorney but do have experience working with clients through the bankruptcy process. 

Yeah generally no mandate for private companies to have a Board of Directors, although it  can vary by state as to what functions a company must have. In a situation like Krell has gone through, I'm not surprised Rondi did not constitute a Board. I think it is also mute reinforcement that Bicking or any other investor did NOT have a significant financial interest in Krell. Invariably, someone putting  money into a business or someone with substantial ownership wants a Board and someone looking out for their financial interests.

Yeah generally no mandate for private companies to have a Board of Directors, although it  can vary by state as to what functions a company must have. In a situation like Krell has gone through, I'm not surprised Rondi did not constitute a Board. I think it is also mute reinforcement that Bicking or any other investor did NOT have a significant financial interest in Krell. Invariably, someone putting  money into a business or someone with substantial ownership wants a Board and someone looking out for their financial interests.