Zero Energy Systems in Coralville has shut down effective Thursday.
The closure comes after Zero Energy filed for Chapter 11 bankruptcy protection while in a legal dispute with its lender, MidWestOne Bank.
In an emailed statement to The Gazette Thursday, Zero Energy CEO Scott Long said the company “will officially close after a hard-fought battle to gain cooperation from” MidWestOne Bank.
The news comes less than a week after Long said the maker of insulated concrete walls laid off its entire production staff of about 40. The company had about 12 other employees in addition to that staff.
Zero Energy filed for bankruptcy protection in late March after Iowa City-based MidWestOne sued the company. The bank claimed Zero Energy was in default of its loans and owed it more than $16 million.
MidWestOne sought a receiver to take over operations of the company, but that suit was put on hold once Zero Energy filed for bankruptcy.
Long later filed a counterclaim in which he asserted MidWestOne interfered with Zero Energy’s ability to negotiate venture capital financing and that two employees misrepresented the benefits of restructuring Zero Energy’s loans with the bank for their own financial gain.
MidWestOne Bank declined to comment Thursday.
Zero Energy opened a 45,000-square-foot production plant in 2014 at 428 Westcor Drive in Coralville. The state of Iowa and city of Coralville each provided Zero Energy with incentives for the plant’s construction.
Both are listed as creditors in its Chapter 11 filing.
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Long said Thursday the Chapter 11 case, one that could have permitted a reorganization, would be converted to Chapter 7, used in liquidation proceedings.
He also said Thursday that “class action lawsuits against MidWestOne Bank will likely follow our litigation” due to “millions of dollars in damages” being incurred with customers whose orders Zero Energy could not fulfill.
“Hopefully, as a publicly traded bank and as a direct result of the massive financial losses that the MidWestOne shareholders will incur, they will finally begin to push for administrative changes so this type of questionable and abhorrent behavior will not destroy other future Iowa businesses,” Long said in the email.
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