Continental Promotion Group, Inc., one of the country’s largest rebate-processing companies, has filed for Chapter 11 bankruptcy protection, citing liquidity problems.
The Nov. 14 filing leaves in question the firm’s ability to fund “several million dollars” in rebate checks to roughly 300,000 consumers, according to papers on file with the U.S. Bankruptcy Court, Middle District of Florida, Tampa Division.
The court has approved the company’s plans to borrow money from a long list of its clients to pay the rebates, and the clients are prepared to advance CPG the money, the papers state.
CPG is resorting to such an arrangement because it is unable to obtain credit from any other source other than it’s existing clients, the documents continue.
“We are working with our clients to the extent possible to assist with the honoring of consumer rebate checks outstanding prior to the bankruptcy filing or providing alternate direction to consumers,” the company said in a statement.
The statement was released by CPG spokesperson Kevin Iurato in response to a call to CEO Daniel Granger.
CPG plans to borrow $1.7 million from Canon USA to cover 30,117 rebate checks; $1.2 million from Behr Process Corp. via The Home Depot to back 68,865 checks; and $197,790 from Bed Bath & Beyond for 21,861 checks, according to the court filing. This money will be repaid, court papers state.
“The main thing that we want to get out is that any consumer that currently has a rebate check that came from a Home Depot rebate, the check is good,” said Home Depot spokesperson Jean Niemi.
However, this does not mean that all consumers who participated in these rebate programs will be able to cash their checks.
CPG has petitioned the court on an emergency basis hoping to stave off potential lawsuits should consumers begin to find that their rebate checks are not being honored.
Meanwhile, the firm apparently is reducing headcount. The court papers state that it had 242 employees prior to the petition, and that it would have 61 afterward. It was not clear at deadline whether these layoffs have occurred.
CPG is based in Tampa and has offices in Tempe, AZ and Ireland.
Home Depot said that it had paid the money upfront, but it is not clear what the other clients’ arrangements were.
“It is generally a rule of thumb wherein the client company typically either advances the monies for rebates or does zero balance accounting, meaning they don’t pay the bank until the checks clear,” said Hal Stinchfield, the CEO of Promotional Marketing Insights Inc., a promotion consultancy. “A third option is that the client owns their own bank account in which case they are rarely at financial risk.”
CPG spokesperson Iurato had not responded to additional calls for comment at deadline.
“This is a very disappointing development,” Stinchfield said. “The impact on rebate sponsors and their consumers is incredibly disruptive.”
He added: “Our phones are ringing off the hook with requests to vet out new fulfillment vendors so clients don’t get stung twice. This should also be a wake up call for any rebate sponsors who have not voluntarily reported un-cashed checks per state escheatment regulations.”
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