Trustee for bankrupt tobacco companies reaches agreement with two states

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Peter Tourtellot, the trustee for three bankrupt Mocksville tobacco companies, said Monday that he has come to escrow agreements with Missouri and South Carolina. The states have claimed they were owed escrow payments and penalties from one of the companies, Alternative Brands Inc. In the agreement, filed Friday and reached after last week's court-ordered mediation sessions, Missouri will receive $1.98 million — $1 million in penalties, $773,774 in an escrow claim and $205,055 in an administrative claim. South Carolina will receive $1.3 million in an escrow claim. The plan requires approval from U.S. Bankruptcy Judge William Stocks.

The proposed agreement is the latest development involving Renegade Holdings Inc., Renegade Tobacco Co. and Alternative. The companies have a combined 94 employees, down from 140 when they initially entered bankruptcy in January 2009. The escrow disputes have been a legal hurdle for Renegade Holdings' second bankruptcy exit plan, which has been challenged by the National Association of Attorneys General. "From Renegade's perspective, this stops the litigation and the costs associated with such an effort and puts us closer to emerging from Chapter 11," Tourtellot said. Some states have said they would delist Alternative's cigarette brands if they are not paid their escrow amounts.

 When a state delists brands as no longer government-approved tobacco products, retailers are required to sell off and remove those brands from their shelves within 60 days. Tourtellot said the possibility of the brands being delisted has led some retailers and wholesalers not to stock the cigarettes. Renegade had been willing to allow its cigarettes to be delisted in Missouri and Tennessee, thus disallowing their excise-tax claims altogether. With the agreement, it appears Missouri was not willing to call Renegade's bluff, and Tourtellot agreed Alternative owed the escrow claims of both states. Tennessee is pursuing a trial for its claim of $3.4 million in delinquent escrow and nearly $10 million in penalties.

Tennessee's penalty claim represents 39 percent of the overall $25.9 million in penalty claims. "We have now settled or agreed with all of the states with the exception of Tennessee," Tourtellot said. "Hopefully within the next several weeks we will have a better understanding of their claim." On June 7, a settlement agreement found that North Carolina could receive $6.58 million — or about 40 percent of the $16.7 million delinquent escrow amount being requested by the attorneys general association for 16 states.