Svenhards files for Chapter 11 bankruptcy

Svenhard’s cites between $10 and $50 million owed to creditors, cites $1-$10 million in assets in bankruptcy filings

By Paul Myers

EXETER – Svenhards officially filed for bankruptcy last month, spelling trouble for the central valley baking company.

On Dec. 19, the company filed for chapter 11 bankruptcy citing between $10 and $50 million in estimated liabilities owed to between 200-999 creditors. According to Svenhard’s bankruptcy paperwork the company has between $1 million and $10 million in estimated assets. 

 In a resolution passed unanimously on Dec. 13 by the Svendhards Swedish Bakery Board of Directors, they determined that it was best to file for bankruptcy.

“The Board of Directors has determined, based upon prior events and advice of counsel, that it is in the best interests of the Company, its creditors, and other interested parties, that the Company file a petition under the provisions of Chapter 11, of title 11 of the United States Code,” the resolution stated.

In the same resolution the board authorized chief operating officer David Kunkel to file for bankruptcy on behalf of the company.

Kunkel could not be reached as of press time to comment on the bankruptcy.

Adam D. Stein-Sapir, a portfolio manager at Pioneer Funding Group, which specializes in bankruptcy cases said that Chapter 11 is an opportunity for debtors to better organize their debt.

“Essentially bankruptcy gives the company breathing room to restructure their affairs,” Stein-Sapir said.

Svenhard’s top 20 creditors listed in their filings range from $170,000 to over $5 million. The largest creditor is Bank of America for an unsecured line of credit worth $5,029,044.97. Their third highest creditor is the Bakery and Confectionery Union for a pension fund settlement agreement worth $2,380,409.88. 

“[It] appears they were behind on their contributions…I’m speculating here but it’s likely what happened is they suffered a decline in revenue and cashflow…and made the decision to enter into chapter 11, and hopefully restructure their affairs and continue to operate with less debt,” Stein-Sapir said.

Of the top 20, Svenhard’s listed six different pension related creditors adding up to $1,190,920,48. There was also an employment claim settlement to Kingsley & Kingsley APC worth $166,666.64. The law firm deals with cases related to wrongful termination, sexual harassment and discrimination as well as other workplace related areas of law.

Perhaps another financial hit to the Svenhard’s’ bottom line was the sexual harassment lawsuit filed in February 2018. Angelica Ruiz was the second woman to file a suit against Kunkel’s great nephew, John Kunkel, who worked in the Exeter bakery. Ruiz claimed that she was discriminated against because of her sex, administrative neglect and was the victim of sexual battery while performing her job.

According to court documents filed in the U.S. District Court for the Eastern District of California Ruiz was hired on Aug. 24, 2017 as a grocery line production member. She was later, “forced to interact with [David Kunkel’s great] nephew…who immediately subjected [Ruiz] to a constant pattern of sexual harassment and created a hostile work environment.”

According to the same documents Ruiz was exposed to inappropriate and unwelcomed sexual advances and sexually suggestive remarks by John. Ruiz claims that John rubbed himself on her buttocks in November 2017.

Ruiz is the second such employee to file suit against Svenhard’s and managers. Lorena Velasquez filed a complaint on Dec. 19, 2017 against the bakery and its foreman Israel Sanchez and supervisor Marcelino Chaires, claiming that they violated her rights under the 1964 Civil Rights Act and the California Fair Employment and Housing Act. Both Ruiz and Velasquez live in Lindsay.

According to court documents, Velasquez began working night shifts on the singles line at Svenhard’s main production facility on Industrial Drive in Exeter on Jan. 11, 2016. “Almost immediately after starting work at Svenhard’s” Velasquez alleges that she was subjected to inappropriate comments by her then-supervisor, Israel Sanchez, who made comments about her jeans.

Velasquez reported the incident to her union representative in February or March 2016 but claims that “Svenhard’s management took no action in response.” Velasquez then requested a transfer to “escape the verbal abuse” and was reassigned to the 4 a.m. shift in sanitation rather than a similar position somewhere else on the line. Sanchez was not terminated or reassigned.

In May or June 2016, Velasquez was reassigned to work the make-up line. Shortly after starting the new position, Velasquez claims that her new supervisor, Chaires, began making inappropriate comments to her about the different ways in which he would have sex with her, as many as three times a day nearly every day she worked. She also alleges that Chaires would stand in a corner and leer at her before coming over and making the comments, even standing behind her and telling her that he wanted to grab her.

After filing the complaint, Velasquez was reassigned to work the night shift under Sanchez again. She states that she believed the reassignment and a disciplinary warning on Sept. 1, 2017 were both issued in retaliation for her complaints of sexual harassment. The complaint goes on to say that two female coworkers, who are friends of Chaires, have also made comments and expressed their disapproval with her while Chaires and Sanchez continue to harass her and other women at the company.

It is unknown whether $166,666.64 owed to Kingsley & Kingsley APC is related to the two sexual harassment cases. Stein-Sapir said that such cases can hurt revenue and cashflow. 

“A lawsuit can absolutely bankrupt a small company. Sometimes the legal fees and distraction can cause enough disruption for the company to file for bankruptcy,” Stein-Sapir said.

In 2014 Svenhard’s sold their Oakland facility for $8 million in anticipation for their move to their current Exeter facility in the summer of 2016. Their plant on Industrial Drive is 40% larger than their former 120,000 square foot Oakland location and made way for a sizable workforce increase. On the outset, Kunkel said in an interview with the Sun-Gazette in 2015 that he planned to hire around 150 employees by 2016.

By July 15, 2018, Svenhard’s laid off their drivers in favor of a contract with Bimbo Bakeries who started delivering Svenhard pastries the following month. Kunkel said in an interview with the Sun-Gazette last year that he offered drivers the opportunity to work for a commensurate wage inside the bakery, and negotiated positions for his drivers with Bimbo. 

Kunkel added the move was likely to save the company on efficiency and dollars as Bimbo drivers work on commission and have an incentive to sell and deliver more product at a faster pace. But word of negotiated jobs had not seemed to reach the company’s drivers at the time.

Jeremy Schwabenland, who worked out of Svenhard’s Visalia Depot, had been with the company for 12 years as a route driver and sales representative handling merchandise, delivery and billing for the accounts he serves. In a 2018 interview, he told The Sun-Gazette he felt as if Svenhard’s had sold them out to increase their profits.

“They got the big tax break. I’m sure they did, but we got a pink slip instead,” Schwabenland said.

To make matters worse Schwabenland battles chronic obstructive pulmonary disease (COPD) from a partially collapsed lung. But because he was comfortable driving his Exeter, Visalia and Reedley routes, he knew how to get through it. He was afraid that if he joined Bimbo he would have a new route and with it a new set of obstacles.

Instead of moving into the bakery or working with Bimbo, he said he was likely to take on a different line of work.

Wayne Nordyke, who was located at the Fresno branch, had been with the company for 16 years. Like Schwabenland, he received a text from his supervisor and an official letter, too. Nordyke said that he and Schwabenland would commiserate over the condition of the trucks they drove, and how often they would break down.

“We always drove junk trucks. It was a joke between drivers for a long time,” Nordyke said.

Schwabenland said the fleet was mostly from the 1970s and ’80s, and the company would only invest into them what needed to be done to keep them running.

In explanation of his decision Kunkel said in 2018 that outsourcing was a business move to keep the company operating successfully.

“You can’t make everyone happy when you do something like this. But to be successful in business you have to make some changes,” Kunkel said.

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