Tri-Lite, to Avert Foreclosure, Files for Bankruptcy

SANTA ANA — Tri-Lite Inc., a manufacturer of energy-saving light fixtures, filed for federal bankruptcy protection Monday after a Cincinnati bank moved to foreclose on the troubled company last week.

Tri-Lite executives said in a press release that the petition for Chapter 11 reorganization was a response to a decision by Star Bank on Friday to initiate foreclosure proceedings because it determined that Tri-Lite violated terms of a $5-million credit agreement.

Executives at Tri-Lite and Star Bank could not be reached for comment.

Star Bank also refused to honor Tri-Lite’s payroll checks early last week, according to a press release issued by the company. That forced Bernard B. Katz, whose company, Helionetics Inc., is the majority shareholder, to cover Tri-Lite’s payroll with a personal check, executives said.

Tri-Lite had $14.3 million in assets and $8.64 million in debts--plus $3.1 million in disputed loans owed to Star Bank--at the end of December, according to the press release. The loans have since been reduced to $2.1 million.

Tri-Lite filed for bankruptcy protection “to protect all of the shareholders,” Katz said in prepared remarks. Foreclosure proceedings would have led to the appointment of a receiver, who would have liquidated the company’s assets, he said, and made it “more than likely that all of Tri-Lite’s shareholders would have been wiped out.”

Katz also said in the release that he believes the disagreements with Star Bank might be worked out in the near future, and that he expects Tri-Lite to “emerge from the proceedings a financially viable company with strong earnings capability.”

Katz is chief executive of Helionetics Inc., a former Irvine defense contractor that itself went through bankruptcy reorganization in the 1980s. The company, now in Van Nuys, makes electronic power conversion equipment and buys stakes in other firms with what it considers promising technologies.

Helionetics, as guarantor of the Tri-Lite credit facility, said it sued Star Bank in December on so-called lender liability grounds. Further information about the suit was unavailable.

Katz’s brother, A. Alvin Katz, founded Tri-Lite about 20 years ago but resigned last July to meet one of the conditions set by Star Bank for issuing the company’s $5-million credit facility.

Under the terms of that agreement, Alvin Katz stepped down and the company’s headquarters was moved to Cleveland, where its subsidiary, NL Corp., is based. The bank also required that Lawrence Terkel, NL Corp.’s president, assume the top position at Tri-Lite.

But when Star Bank notified Tri-Lite executives Feb. 14 that it might foreclose on the company, Terkel resigned, setting in motion a series of sudden changes. NL Corp. was closed, Alvin Katz reclaimed the top management spot at Tri-Lite and the company was moved back to Orange County.

Tri-Lite’s largest shareholders, including Helionetics, have been giving Tri-Lite cash to fund ongoing operations.