The owners of a Cody-based fuel distribution business and chain of gas stations/convenience stores have filed for bankruptcy, citing millions of dollars of debt.

Red Eagle Oil, Inc., filed for Chapter 11 bankruptcy on Aug. 1 in Wyoming’s federal bankruptcy court, blaming the economic downturn and an inability over the past two years to collect some of the money it is owed. Court documents say Red Eagle has been unable to pay many of its bills since April.

Chapter 11 bankruptcy allows a company to reorganize, and Red Eagle says it has “a strong likelihood” of successfully reorganizing, though it has indicated it does not expect to be able to pay all of its creditors.

Red Eagle Oil is owned by family members Dale, Judy, Bryan, Brad and Scott Hinze, all of Cody.

At a hearing last week, Federal Bankruptcy Judge Peter J. McNiff allowed the company to essentially keep running the business as usual for the time being.

“While (Red Eagle Oil’s) business has suffered in the midst of the current economic downturn, its stores have greater value as an operating enterprise than being closed and the assets sold piecemeal,” the company’s bankruptcy attorney, Bradley Hunsicker of Casper, wrote in a motion.

None of Red Eagle’s creditors objected to letting the company continue operating. However, Red Eagle’s largest creditor warned that when the summer tourism and revenue drops off in the fall, it will want things to change.

The next hearing in the case is slated for Aug. 22.

It’s not clear from court documents how much Red Eagle owes, though if pending lawsuits and bankruptcy documents are accurate, the sum approaches at least $6 million. In the company’s initial bankruptcy petition, it said it owes between $1 million and $10 million. In that petition, Red Eagle checked a box indicating that when it finishes reorganizing, it does not expect to have enough money to pay back its unsecured creditors — those creditors whose lending wasn’t backed by collateral.

A more detailed filing of Red Eagle’s assets and creditors, due Monday, was not filed and the company asked for a time extension.

A filing from last week indicates that Red Eagle Oil currently operates 15 Red Eagle Food Stores/gas stations with one or more locations in Cody (three), Ralston, Lovell, Riverton (two), Buffalo, Casper (two), Sheridan (two) and Guernsey.

Red Eagle Oil runs all of the stores and owns the gas and merchandise. But with the exception of two of the Cody stores, the stores’ land and buildings are actually owned by a separate corporation also owned by the Hinzes — Red Eagle LLC, court documents say.

Red Eagle Oil also sells fuel wholesale as a distributor and hauls condensate, crude oil and other oil field commodities with a fleet of 26 trucks and 60 trailers.

The company employs 114 people, including the owners, office staff, store clerks, truck drivers and others.

Red Eagle started having problems collecting money from its customers when the economy tanked in 2009, said Red Eagle Oil Vice President Bryan Hinze in a court filing. Red Eagle Oil tried to take on a bulk plant as trade for one particularly indebted account, but the plant’s operations failed to cover the amount Red Eagle was originally owed, Hinze said.

Red Eagle then began “factoring” the accounts it was owed — selling debts to a third party in return for a smaller amount of immediate cash.

“The expense of factoring ultimately led to (Red Eagle Oil) no longer being able to cash-flow its business,” Hinze said.

By April, the company could no longer pay its bills.

Red Eagle officials say they tried to negotiate “reasonable payment plans” with its vendors and creditors over the past several months, and they hired a real estate agent to help sell some of the company’s property. However, those efforts didn’t resolve the company’s “liquidity and cash-flow crisis,” according to documents filed by Hunsicker.

Pinnacle Bank, owed just more than $2 million, is the company’s largest creditor.

Michael LaBazzo, Pinnacle Bank’s Cody lawyer, said during the Aug. 8 hearing that the bank has no problem with Red Eagle continuing to use its cash to operate through August, probably September and maybe into October.

“But the world will change for this debtor after that,” LaBazzo said, saying Pinnacle would likely object then to allowing business to continue without changes.

“When the winter months come, the history has shown that they (Red Eagle) will not be able to generate enough positive cash flow to service the debt to the bank and meet their other obligations, so that is our concern,” he said.

LaBazzo described the company’s business model as “hopefully getting back most of what they paid” for fuel while making money by selling items like potato chips in the stores.

Red Eagle has been hit with at least four lawsuits in various courts for allegedly failing to pay for its fuel and supplies. The unpaid debts alone claimed in those cases total more than $3.86 million.

Red Eagle has disputed how much it owes in court, but has already been ordered to pay up in one of those cases. On July 21, Wyoming Federal District Court Judge Nancy Freudenthal ordered Red Eagle to pay more than $1.3 million to DATS Trucking of Utah to settle its debt with that company. DATS sued on May 17.

Another one of the companies filing suit, Hermes Inc., also known as Wyoming Refining, alleges Red Eagle drew as much fuel as it could in early April before Wyoming Refining learned the business was insolvent. Wyoming Refining accused the company of fraud and civil theft, among other claims; Red Eagle denies them.

In all of the civil cases, Dale and/or Bryan Hinze is named as a co-defendant; an additional case in Park County’s District Court filed last week by Big D. Oil Co. of South Dakota seeks $53,212 from Dale and Bryan Hinze individually for petroleum products Red Eagle didn’t pay for.

The bankruptcy petition froze all suits against Red Eagle, and last week Hunsicker asked the court to also block cases from proceeding against the Hinzes, saying the owners need to focus their energy on successfully reorganizing Red Eagle.

Hunsicker indicated the Hinzes may use their other assets to help Red Eagle Oil. Local properties owned by the Hinzes through other, separate corporations include the One Stop Shoppe and Plaza Fuel locations in Powell and the Libations liquor store in Cody, county property records and state business records indicate.

At the conclusion of last week’s hearing, bankruptcy Judge McNiff complimented Red Eagle’s attorney “on what appears to be a fine and adequate business-like pursuit of Chapter 11.”