A Coralville company that filed for bankruptcy protection amid a dispute with its lender has let go 40 employees.
Zero Energy Systems laid off its entire production staff effective Monday, CEO Scott Long said in an Saturday email. More layoffs are expected as the company winds down operations, he said in a follow-up Monday.
The company, which makes insulated concrete walls, filed for bankruptcy in late March after Iowa City-based MidWestOne Bank sued Zero Energy. The bank claimed Zero Energy had defaulted on its loans and owed the bank more than $16 million.
At the time, Long said MidWestOne had refused to work with his company even as it was seeking outside investment.
“We are very regretful and saddened for this situation, but due to MidWestOne’s extremely aggressive behavior and absolute refusal to work with us, our customers, and our suppliers to reorganize, we have no choice in the matter,” Long said Saturday regarding the layoffs.
In its initial suit, MidWestOne asked for a receiver to be appointed who would take over Zero Energy’s operations. A stay was put in place on the suit once Zero Energy filed for bankruptcy.
Long and Zero Energy filed counterclaims against MidWestOne on May 3. In the filings, Long’s claims asserted MidWestOne interfered with Zero Energy’s ability to negotiate venture capital financing.
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He also claims two bank employees presented the company with a restructuring of Zero Energy’s loans, but said the employees misrepresented the benefits of the restructuring and pushed it “to enhance their ability to collect bonuses or compensation from the bank, and not for the purpose of benefiting Zero Energy.”
Long asked a judge to assign damages and to dismiss the suit.
MidWestOne declined to comment Monday.
Zero Energy had 52 employees before Monday. Final layoffs are expected to occur in upcoming weeks, Long said.
The company has closed all its accounts, but Long said he and his partners have not formally dissolved Zero Energy.
Zero Energy received incentives from both the state of Iowa and city of Coralville in 2011 to put toward the construction of its 45,000-square-foot plant on Westcor Drive. It was not clear Monday if the pending bankruptcy case would result in repayments of all or part of those incentives.
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