Bankrupt Oil Field Equipment and Service Provider OFS International LLC Sues Cyprus-Registered Steel Company For $10 Million Stock Deal
May 31, 2021, Southern District of Texas – OFS International LLC (“OFSI”) and OFSI Holding LLC ( “Plaintiff ”or “Debtors”) recently commenced a lawsuit against TMK Steel Holding Limited (“TMK Steel” or the “Defendant”) under 11 U.S.C. §§ 544, 548 and 550 of the Bankruptcy Code for a “stock deal entered” between the parties in 2019. Specifically, the Plaintiffs seek to recover a $10 million “transfer” of cash made by OFSI, through its parent company OFSI Holding, to TMK Steels as payment for the purchase of TMK Steel’s 49% of the outstanding shares in OFSI Holding.
Allegedly, TMK Steel, Semerikov, and OFSI Holding executed a sale and purchase agreement according to which OFSI Holding agreed to buy TMK Steel’s 4,900 shares (i.e. 49%) of OFSI Holding in exchange for $15 million to be paid as $500,000 paid at closing, $10 million paid within 90 days of closing, and $4.5 million by June 2020. Using funds it received from Semerikov, OFSI Holding made the initial $500,000 transfer to TMK Steel, which “subsequently transferred” its shares to OFSI Holding. According to the complaint, OFSI Holdings had no funds from which it could pay the $10 million that was due to TMK Steel. Thus, the Debtors allegedly borrowed $10 million from JP Morgan Chase and authorized OFSI to make a $10 million dividend or distribution to OFSI Holding to be utilized solely to make the $10 million payment to TMK Steel due under the agreement.
In its complaint, the Plaintiffs allege that OFSI “received no value for the alleged transfer” and was “likely insolvent” at the time of the transaction. The Plaintiffs also allege that TMK Steel “did not make the transfer in good faith” because it “knew the source of funds” was OFSI, not OFSI Holding or Semerikov. According to the complaint, the additional $10 million borrowed from JPMorgan Chase to make the transfer was a debt that was beyond OFSI’s ability to pay as such debt matured.
The Plaintiffs thus seek the avoidance and the return of the transfer to OFSI and claim money damages against the Defendant under Sec. 548 (a)(1)(B), 550, and under Tex. Bus. &Com. Code Ann. § 24.008. By way of background, Houston-based OFS International LLC petitioned the Southern District of Texas Bankruptcy Court in Houston for Chapter 11 protection recently on May 31, 2021. OFS International, LLC, also known as OFSi, is a privately held company that provides services required to supply oil country tubular goods for the oil and gas industry. The case is In re OFS International, LLC et al (Case No. 21-31784). The company estimated $10 million to $50 million in assets and $50 million to $100 million in liabilities.