THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, August 20, 1994 TAG: 9408200222
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Long : 114 lines
Mike Worrell's steamed shrimp restaurant and delivery business landed in bankruptcy court after federal tax collectors seized it last week.
Hampton Roads Shrimp Inc. filed for protection from creditors in U.S. Bankruptcy Court in Norfolk on Aug. 12, the same day the Internal Revenue Service agents closed the company's operations, known as Worrell's Steamed Shrimp.
``They tried to seize the business and we filed a Chapter 11 in self-defense,'' said Jonathan L. Hauser, Worrell's attorney.
A filing under federal bankruptcy law Chapter 11 allows a company to stay in business under court supervision while it prepares a plan to repay its creditors.
The action does not involve Worrell Brothers Restaurant and Raw Bar, a Virginia Beach landmark mostly owned by Worrell's brother, Chris Worrell.
While scores of companies file for bankruptcy in the region every month, Mike Worrell's filing stands out because of the wide attention raised by the ventures launched earlier by the Virginia Beach entrepreneur.
The filing blunts his plan to spread the shrimp business thoughout the country in a chain of franchise restaurants, but it's not the first time Worrell has faced a financial problem. His catamaran sailboat race, known as the Worrell 1,000, foundered in 1987 under unpaid debts.
At Hampton Roads Shrimp, the business apparently fell behind on paying its federal taxes, including taxes withheld from the wages of employees. The company, based in Virginia Beach, currently employs 45 people.
``It would appear that they have withheld the funds from their employees, but not sent them on to the federal government,'' said Joy Sligh, an IRS spokeswoman in Richmond.
Worrell, in an interview Friday, declined to discuss the reason for the seizure. ``That's a long story,'' he said. ``I'd rather not go into those details.''
Hampton Roads Shrimp, which operates three restaurants, claimed assets of $161,000 and debts of $229,696.13, with the single largest debt owed to the U.S. government. The company and the IRS agreed after the bankruptcy filing to allow the business to continue operations, Hauser said.
The IRS has filed more than $200,000 in liens since 1993 against Hampton Roads Shrimp and its predecessor Worrell's Steamed Shrimp Inc.
``The company's healthy, profitable,'' said A. Michael Worrell, president of Hampton Roads Shrimp. ``We just used the strategic move of a Chapter 11 to restructure - to determine the best way to deal with that debt.''
The liens, filed in Virginia Beach Circuit Court, cover federal employment taxes such as income tax, social security and health insurance, as well as federal unemployment taxes from 1988 to the first three months of 1994.
It's not clear how much, if any, of Hampton Roads Shrimp's federal tax debt has been repaid. Worrell said the company owes the IRS about $150,000.
Hampton Roads Shrimp's financial troubles are not the first for Worrell. He organized catamaran races from Florida to Virginia Beach in the mid-1970s. The first races were successful, but as the race's reputation grew, so did its debts, and ultimately it ran aground on a series of judgments against Worrell.
He sold the race in 1987 when it became too big for him to support by himself. Instead of seeking personal bankruptcy, he vowed to repay all his debts. In an interview last fall, he said he still owed more than $50,000 in debts left from the race.
On Friday, Worrell insisted he'll repay his debts. ``We're not getting out of any debts,'' he said. ``We have no intention of using (Chapter 11) to get out of any of our obligations.''
Worrell started the steamed shrimp business in 1988, delivering shrimp out of his brother's Virginia Beach eatery. He opened his first store in 1989 on Laskin Road. By 1991 sales had surpassed $350,000.
He opened a second store in the Green Run section of Virginia Beach in 1992 and sales soared to nearly $650,000. Last year, with a third Virginia Beach store, sales passed $800,000.
With new investors Worrell planned to open up to 15 Worrell's Steamed Shrimp locations in Hampton Roads. He hoped to buy a defunct public company, a procedure called a reverse merger, and then raise cash by selling stock to the public.
He also planned to hire managers, develop a franchise program and secure a supply of shrimp by purchasing farms and packing plants in Ecuador. Worrell and Hauser said there's a lot of interest from potential franchisees throughout the country.
But those plans are on hold now. ``This will mean that things will be changed a little, but that's still the long-range plan,'' Worrell said.
He said he'll deal with the Chapter 11 and then move on to the expansion.
``We'll have to work our way through these tax problems, but its not insurmountable,'' Hauser said.
After the federal government, which would be paid before other creditors in the bankruptcy, there are unsecured creditors owed lesser amounts. Owed the most among the unsecured creditors is Sandler Foods, a Virginia Beach-based food distributor owed $14,572.
The next largest amount, $12,000, is owed to the Virginia Beach office of the accounting firm Ernst & Young. The other largest unsecured creditors include Randolph, Mass.-based Mister Donut of America Inc. which is owed $9,000. Mister Donut is the landlord of Worrell's location on Independence Boulevard in Virginia Beach.
Other creditors include seafood suppliers, printing companies, a sign company and advertising venues such as Joy 95 Radio, which is owed $3,720.
Worrell expects to reach a settlement with the IRS and progress through bankruptcy quickly.
``We only had one reason to go in,'' he said. ``We're healthy and robust and I believe we'll get everything taken care of real quick.'' ILLUSTRATION: Color file photo by Mort Fryman
Federal tax collectors tried to seize the restaurant and delivery
business owned by Mike Worrell, above, last week. Now it's seeking
to reorganize its debts. "The company's healthy, profitable,"
Worrell said, calling Chapter 11 a strategic move.
File photo
Below: the Worrell's location on Laskin Road, at the Virginia Beach
Oceanfront.
KEYWORDS: BANKRUPTCY REORGANIZATION by CNB