Qualteq Directs Its Attention To Ch. 11

Aviva Gat

August 15, 2011

The Deal Pipeline

Qualteq Inc., which provides direct-marketing services for numerous Fortune 500 companies, filed for bankruptcy protection over the weekend after litigation filed by certain shareholders caused the company to default on loan agreements.

The South Plainfield, N.J., company, which does business as VCT New Jersey Inc., filed for Chapter 11 in the U.S. Bankruptcy Court in the District of Delaware in Wilmington on Sunday, Aug. 14.

Along with its petition, Qualteq filed several first-day motions, including requests to use cash collateral, continue using its current cash management systems and pay taxes, vendors and employee wages.

Qualteq is also seeking joint administration with affiliates 1400 Centre Circle LLC, 5200 Thatcher LLC, 5300 Katrine LLC, Automated Presort Inc., Avadamma LLC, Creative Automation Co. , Creative Investments GP, Fulfillment Xcellence Inc., Global Card Services Inc., Unique Data Services Inc., Unique Embossing Services Inc., Unique Mailing Services Inc., University Subscription Service Inc., Veluchamy LLC, Versatile Card Technology Inc. and Vmark Inc.

Qualteq offers database management services, along with customized printing, mail sorting and shipping, and plastic card production to Fortune 500 companies, national banks and others, documents show.

The company has nine facilities, with more than 1 million square feet for its services in Illinois, Iowa and New Jersey. Its 1,370 employees executed more than 6 billion marketing messages in the past year, making Qualteq the largest direct-marketing provider in North America, according to a declaration by Qualteq’s vice president, Arun Veluchamy.

In 2010, the company generated about $155 million in gross revenues. However, the business was significantly harmed by litigation commenced by shareholders.

While Qualteq was able to manage and maintain operations for several months, the debtor was concerned about its ability to continue due to its present cash needs. In his declaration, Veluchamy said Qualteq’s business is seasonal and its greatest volume of business takes place in the months leading up to the December holiday season. Now Qualteq is in need of cash to purchase raw materials to gear up for the preholiday season.

Qualteq said it needed some stability to assure customers that its services won’t be disrupted.

Qualteq hired Dan Scouler of Scouler & Co. as an independent chief restructuring officer. Mr. Scouler recommended commencing a Chapter 11 proceeding to resolve Qualteq’s financial issues.

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Qualteq directs its attention to Ch. 11