Formica Brothers Bakery in Atlantic City and two affiliated companies have filed for Chapter 7 bankruptcy liquidation, but the jobs of about 67 of 71 workers have been preserved in a deal with another food manufacturer, according to owner Frank Formica.

Taxpayers may be on the hook for more than $2 million in loans made through state economic development programs as a result of the bankruptcy of Formica Bros. Bakery and two affiliated companies.

The businesses, owned by Atlantic County Freeholder Frank Formica, owed about $2 million to the New Jersey Economic Development Authority and $689,000 to the Pleasantville Urban Enterprise Zone, a program through the state Department of Community Affairs, when they filed for Chapter 7 liquidation in April.

Formica declined to comment Wednesday on the advice of his attorney.

Both the NJEDA and the Pleasantville UEZ have liens on about $400,000 in accounts receivable for Formica Bros., Formica said this month during the first meeting of creditors in Northfield with Bankruptcy Trustee Brian Thomas.

The NJEDA has not filed paperwork in the case, said EDA spokeswoman Virginia Pellerin. But she said it is a secured creditor, first in line for any assets.

The NJEDA made a $2.1 million Stronger New Jersey Business loan to Formica Bros. for working capital following Hurricane Sandy, Pellerin said. The financing was supported by a Community Development Block Grant for Disaster Recovery from HUD, so it was federal money, she said.

Pellerin said Formica repaid $7,999.48 in principal, plus $89,878.93 in interest and late fees. The present balance due is $2,087,216.04.

Formica stopped making payments Feb. 1, Pellerin said.

The loan was secured by a lien on business assets, and the NJEDA has a first-position lien on Formica’s general business assets, she said. The affiliated companies are Baker Boys LLC, of Pleasantville, and Atlas Shrugged LLC.

As of September, the NJEDA’s loan workout team was trying to resolve Formica’s delinquent payments, Pellerin said.

“The NJEDA recently received a Notice of Chapter 7 Bankruptcy Case (309c) indicating that there was no property available to pay creditors, and that we should not file a claim at this time,” Pellerin wrote. “It also stated that if assets become available to pay creditors, we will be notified to submit a claim. NJEDA will work with the New Jersey Office of the Attorney General as necessary in the bankruptcy.”

Formica estimated at the bankruptcy meeting that about 85 percent of accounts receivable are collectible — about $340,000.

That means taxpayers are likely to recoup at most only about $340,000 of the $2.6 million, leaving an uncollected balance of about $2.26 million.

No one from the Pleasantville UEZ returned repeated calls for information about the amount of the loan, how much was paid back and for what it was to be used.

Formica also told the trustee he has a deal with Linwood’s Pat McKenna and his A Taste of Italy food manufacturing company to take over bread making equipment, keep employing 67 of Formica’s 71 employees, continue making Formica’s Atlantic City bread and servicing Formica’s customer base, Formica said.

Formica Bros., an iconic institution known for baking “Atlantic City bread,” would have celebrated its 100th year in business this year.

In April, Formica said the bankruptcy was necessary because of a difficult business climate and because of two lawsuits related to on-the-job injuries that resulted in amputations for two workers, who also received workman’s compensation settlements.

The lawsuits also caused him to drop out of the Republican primary in this year’s Assembly race, Formica has said.

At the creditors meeting earlier this month, Thomas asked whether McKenna is offering anything in exchange for the company’s good name, and Formica said he is being paid $500 a week as a consultant.

McKenna could not be reached for comment.

Several older vehicles were sold to a different party for a total of $4,500, Formica said. He said the value of the bread making equipment was about $62,000, but it would be difficult to get that much at auction.

That equipment is also subject to liens, Formica said, although it was unclear whether McKenna will make any payment to creditors in exchange.

Formica also said he could not provide gross revenue figures for the businesses, and that he had no employees making more than $100,000 a year other than himself. He took disbursements rather than salary, he said.

Contact: 609-272-7219 mpost@pressofac.com Twitter @MichelleBPost

Staff Writer

In my first job after college got paid to read the New York Times and summarize articles for an early online data base. First reporting job was with The Daily Record in Parsippany. I have also worked in nonprofits, and have been with The Press since 1990.

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