Product Quest eyes case conversion with insurance expiration looming

By Caroline Salls

Pittsburgh, Oct. 11 – Product Quest Manufacturing, LLC is requesting conversion of its Chapter 11 bankruptcy case to Chapter 7, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Middle District of North Carolina.

Product Quest said it has two insurance policies that cover potential claims against former or present directors and officers. Of those two policies, one is scheduled to expire on Nov. 4, while the other was renewed for six years in 2017.

The company said the reporting period of the expiring policy can also be extended for six years for an additional premium equal to 150% of the annual premium, which was $45,875.

According to the motion, Product Quest intended to renew the expiring policy for an additional year, but, when it requested a quote for a six-month extension, “the premium quoted for renewal and a six-year prepaid run-off was $475,000 for six months (or $525,000 for 12 months).”

Product Quest said it has no source of funds to pay the premium without the consent of the lenders to use cash collateral for this purpose.

However, the company said the lenders “have not agreed to the use of cash collateral to fund a payment of $475,000 to maintain D&O coverage.”

In addition, the company said Conway MacKenzie and Product Quest Management, LLC and Ei LLC chief executive officer Michael Musso are willing to continue providing services to Product Quest as long as the insurance coverage is maintained. The company’s board of managers has imposed a similar condition on its willingness to oversee the cases and the liquidation of assets.

Holly Hill, Fla.-based Product Quest manufactures primarily over-the-counter drugs and cosmetics, as well as some prescription drugs and animal health products. The company filed bankruptcy on Sept. 7 under Chapter 11 case number 18-50946.

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