But in 2009, when he began a series of debt sales over a four-year period to fund dividend payments, Tops was already insolvent, according to the lawsuit. With Tops in such a weakened financial state, he didn’t have the money to invest in store upgrades, having spent just $ 24 million on capital projects in 2017.
Yet Morgan Stanley orchestrated $ 105 million in dividends in 2009 and an additional $ 30 million in 2010. Two years later, in 2012, Tops paid $ 100 million in dividends to its private shareholders, followed by another. payment of $ 141.9 million in 2013.
In three of the four cases where Tops paid a dividend, she hired another consultant to perform a “valuation analysis” to show whether the company could afford the payment. But the lawsuit argues that in some cases it has omitted important information about pension fund liabilities which, if disclosed, would have shown that the chain’s assets were worth less than they had. to pay on its debt and other obligations.
In 2009, for example, the lawsuit alleges that Tops failed to disclose a liability of $ 45 million in a pension fund for workers who belonged to the Teamsters union. Without this responsibility, the consultant, accounting firm KPMG, concluded that Tops would be worth $ 33 million after paying the dividend. The lawsuit argues that, had the pension liability been taken into account, Tops was in fact insolvent, with a capital shortfall of $ 13 million, rendering her unable to meet the dividend payment.