Minnesota Bank & Trust (MB&T) of Minnetonka, MN has filed documents with the Fourth Judicial District of the Minnesota District Court notifying the court of the existence of a secured agreement with Audio Research Corporation (ARC) and its principal owner, Trent Suggs. This agreement, the bank wants the court to know, has been subject to “Numerous events of default” which “are continuing.”
With this being the case, the bank is asking the court to issue a judgment for the amount owed, plus accrued interest, plus attorneys’ fees, and other collection costs – an amount in excess of $1.5 million.
See more on events surrounding Audio Research Corp & Suggs
More details are beginning to emerge about the deteriorating situation surrounding the beloved high-end audio electronics brand Audio Research and its current owner Trent Suggs. As I reported this past Monday, Audio Research had filed documents with the Minnesota District Court notifying it that the company was entering into an Assignment for the Benefit of Creditors (ABC), a special form of receivership.
Verified Statement and Confession of Judgment and for Replevin
This news was not good news – choosing Assignment for the Benefit of Creditors is an operating option that is an alternative to filing for bankruptcy – but at least it seemed to promise an orderly transition to whatever was next for the storied brand. Not long after that filing, Minnesota Bank & Trust placed a marker down with the court, notifying it of the attorneys representing the bank and that it was a secured creditor of the company.
A day or so later, the bank started a separate action with the court by filing a “Verified Statement and Confession of Judgment and for Replevin.” This densely packed, fifteen-page action offers both the background history of the relationship between the bank and company owner Trent Suggs and provided a tremendous amount of detail about what transpired leading up to when the company went into default.
What the Bank Wants Now
The bank is asking the court for two things: 1) That it enters a judgment of nearly $1.6 million against Audio Research Corporation and owner Trent Suggs, for the defaulted loan; and 2) That it further enter an order for replevin, a legal term that means the court issues an order that all collateral held by Audio Research Corp. and/or Trent Suggs that had been offered as security on the loans must be physically turned over to the bank.
Here are some of the key facts we’ve learned from this latest filing by the bank.
- December 16, 2021 – Trent Suggs/ARC executed a promissory note with the Minnesota Bank & Trust in the amount of $500,000.
- May 24, 2022 – This original loan was “amended and modified, at Borrower’s request,” increasing its amount to $1,750,000. Notably, this loan was now “asset based.”
- These loans are covered by a “perfected” security agreement with the bank on the pledged collateral. And these loans are further secured by a commercial guarantee by Trent Suggs and TWS Enterprises (a separate company owned by Suggs).
- As of March 14, 2023 – “Numerous events of default have occurred, and are continuing…” Examples of default include Audio Research Corp. having a negative net income in fiscal 2022, adverse changes in borrower’s financial condition, the bank’s belief “that the prospect of payment or performance of the loan is impaired,” and more.
- Also on March 14, 2023 – Suggs and the bank sign a new “Forbearance Agreement.” This agreement gave Suggs twenty days to inject working capital from equity investors of at least $750,000 into ARC. It also gave him ten days to “engage a business consultant with demonstrated expertise in Borrower’s subject industry.” There were several other provisions as well.
- June 16, 2023 – If Suggs/ARC had performed perfectly in accordance with the Forbearance Agreement, then the company would have until this date in June to pay off all of its debt to the bank. And if Suggs and ARC did not perform perfectly in accordance with the Forbearance Agreement, they would be considered in default.
Unsuccessful in Obtaining Investment Capital
Unfortunately, Suggs was apparently unsuccessful in obtaining investment capital to inject into the company by April 3rd, as required. Then, on April 4th, Audio Research Corp. filed the Assignment for the Benefit of Creditors paperwork. The bank pointed to these as constituting an “Event of Default.” The bank gave Suggs ten days to “cure” the situation (default).
When Suggs was unable to cure the default by April 14th, the bank filed the Verified Statement and Confession of Judgment and For Replevin with the court. In the body of this confession document, Suggs has signed in agreement that everything the bank says as to the outstanding facts in this matter is true.
Waiting for Court Proceedings to Commence
Because of the filing of the Assignment for the Benefit of Creditors, the bank seeks no relief against Audio Research Corp., but is free to proceed against Trent Suggs.
So now the parties wait for court proceedings in the matter to commence.
Strata-gee reached out to Trent Suggs for comment on this story but didn’t hear back from him prior to its posting.
See all about Audio Research at audioresearch.com.
This story is intriguing. I have to believe that there is a remarkably fine threshold by which a high end audio manufacturer can operate profitably. Especially with the business model ARC seems to have currently deployed. Audio Research has, over the past ten or more years, essentially eliminated anything in their product line which even somewhat resembles an “entry level” product. Gone are the days of the “LS2” and like components. This has left them with a limited product catalog of extremely expensive items; the success of which is predicated on the notion that a minority of very well-heeled clientele will purchase and upgrade every few years; and in a very crowded/competitive market no less. Sounds like a loser to me. I may have it wrong, but ARC never used to try to operate like the niche company they have tried to become; they used to have a range of items suited to meet different budgets/price points. They were the more “sophisticated” alternative to McIntosh. Their current offerings (at least the ones worth interest) are so wildly out of reach for most buyers and the import/offshore manufactured HiFi currently available is sonically a force to be reckoned with. I think a complete sea change of strategy as well as a lot least a partial pivot away from expensive vacuum tubes would benefit the organization. File for proper bankruptcy, discharge what debt you can and start over with a good base of intellectual property and superlative brand equity.
While under ownership of the McIntosh group, ARC was forced out of the entry level price points to reduce competition against McIntosh products. As soon as Suggs purchased the company the i50 series was kicked off, which is a great price point and sounds killer.
I thought the same thing too (re: “where’s the entry level ARC stuff anymore?”) but then I did the math.
The LS2 was $2,500 in 1991. That’s about $5,500 in today’s dollars.
The LS8 (which I would consider far more “entry-level” ARC) was $1500 in 1997 and nearly $3,000 today.
So both of those are clearly below where ARC stuff starts now (although the LS2 is only 33% cheaper than the LS28SE at $7500.)
But the LS5 (which was the top end until the Reference line) was $4,500 in ’93 and $9,500 today – and balanced only (thus less flexible.)
The Ref 1 preamp was $8,500 in ’95 and $17K today, which puts it _right_ at the current Ref 6 SE.
It definitely still suggests there needs to be another layer below the “Foundation” line, but I don’t think we’re ever going to see <$2K ARC "starter audiophile" products ever again.
Trent Shugs appears to be a failure in so many ways
It’s easy to bag on somebody in an anonymous forum. Im sure the employees that are piling on didn’t feel the same when they were all given raises upon Trents arrival at ARC. It’s a terrible situation, but remember what the intentions were and are, to revitalize a sleepy heritage HiFi company. We are all human at the end of the day.
So CE as you basque in anothers “failures” remember who put everything on the line for what he loved so much.
McIntosh and ARC are both doomed..selling over priced boxes of glitter. it’s 2023…they just ain’t with the times. If you don’t change and grow with modern tech, you fail. repackaging obsolete technology, is not winning.
CE just exactly are your qualifications or what makes you qualified to says things as you have?