California logistics company files for Chapter 11

November 18, 2024

A California logistics company has filed for bankruptcy protection, citing the loss of its largest “anchor” customer as one of the main reasons it is seeking to reorganize.

Starship Logistics LLC of Long Beach filed for Chapter 11 bankruptcy on Nov. 11 in the U.S. Bankruptcy Court for the Central District of California. The bankruptcy filing comes amid eviction legal proceedings and several lawsuits being filed against Starship Logistics for breach of contract.”

Starship Logistics is owned by RPG Star Holdings Inc., which was incorporated in Delaware. Starship Logistics, located near the Port of Long Beach, provides its international customers mid- and last-mile logistics services “to fulfill all types of shipping requirements,” according to its website.

The company also states that it offers a cloud-based platform that “integrates order and label management, operational capability management and logistics resources for e-commerce merchants and global freight forwarders … and that its software is “able to sync with major e-commerce platforms, including DHL, Shopify, eBay, Amazon’s service provider network, UPS, and the U.S. Postal Service,” according to court filings.

The bankruptcy petition lists Clarence Xu as CEO and managing director.

What happened?

Over the past few years, Starship Logistics’ business model changed “in light of the fluctuating needs of the shipping industry post-Covid,” according to Xu’s declaration in the bankruptcy case. He said in 2020 and early 2021, the company’s financial challenges stemmed from the loss of its largest anchor customer, which represented up to 95% of its business and required large amounts of warehouse space for its shipping needs, which Starship Logistics operated. The filing does not name the customer.

According to Starship Logistics’ bankruptcy petition, the company “leased multiple warehouse facilities and paid hundreds of thousands of dollars in rent to accommodate the needs of its customers.”

After finding a new anchor customer in 2021, which Xu said represented between 65% and 85% of its business, its new customer defaulted on its obligations to the logistics company and was forced to wind down operations, according to Starship Logistics’ bankruptcy documents.

Amid the post-Covid slowdown in late 2021, Xu said the company’s second largest anchor customer left, leaving Starship Logistics “with unoccupied warehouse space it could no longer afford,” according to court filings. Since 2022, the logistics company “has been trying to decrease its warehouse footprint in order to return to running a profitable business, but those efforts have not been entirely successful, as many former landlords have commenced litigation against [Starship Logistics].”

Starship Logistics is represented by bankruptcy attorney Susan K. Seflin of BG Law LLP of Woodland Hills, California. FreightWaves has reached out to Seflin for comment.

After losing its two major customers, Starship Logistics stated in its bankruptcy filing that “its operations and needed warehouse space have decreased significantly, and as a result, [it] became unable to stay current with its large monthly rent obligations.”

Xu said Starship Logistics was forced to file for Chapter 11 after one of its landlords, Watson Land Co. of Carson, California, which is owed nearly $1.8 million, obtained a writ of attachment from the court against Starship Logistics’ business bank accounts in October, “which likely would have caused [Starship Logistics] to immediately stop all of its business operations,” according to court filings.

On Nov. 6, U.S. Bankruptcy Judge Barry Russell approved Starship Logistics’ motion to use its cash collateral on an interim basis pending a final hearing on Dec. 3 to pay its employees and expenses outlined in the proposed budget. He also granted replacement liens, despite a motion opposing Starship Logistics’ motion filed by Mass Transit Properties of Chatsworth, California. In May, MTP filed a judgment lien notice with the California Secretary of State’s office after obtaining a nearly $347,000 judgment lien against Starship Logistics in April. In its motion, MTP claimed that Starship Logistics had not made a payment toward the outstanding money judgment for six months.

The company lists both its assets and liabilities as between $1 million and $10 million.The company states that it has up to 49 creditors and that funds will be available for distribution to unsecured creditors.

The company’s gross revenues from Jan. 1 until its bankruptcy filing date were around $8.7 million. Its petition states the company made about $14.3 million in 2023 and nearly $12.1 million in 2022.

Starship Logistics states that it has accounts receivable of over $541,000 that are 90 days old or less and nearly $2.3 million that are over 90 days old, with about $1.6 million that is collectible.

Starship Logistics listed its creditors with secured claims, including BMO Harris Bank of Tempe, Arizona, for equipment leases and Secured Lender Solutions of Springfield, Illinois. However, the amounts owed to the companies were listed as unknown. Starship Logistics also listed MTP as being owed nearly $347,000 for a judgment lien.

Creditors with priority unsecured claims include Watson, owed nearly $1.8 million, which Starship Logistics disputes; Cargo Cove Capital LLC of Irvine, California, which is owed $450,000 for a loan; and EastGroup Properties Inc. of Ridgeland, Mississippi, owed nearly $694,000, which Starship disputes.

In its petition, Starship Logistics states that it is named in eight legal actions that are pending or have concluded in California state court.

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