How a private-equity collapse sank Minnesota Rusco

The news came without warning. At 9:30 a.m., CEO Jacob Deems told Minnesota Rusco’s senior leaders that their parent company, Renovo Home Partners, was bankrupt — and that their own company was finished, leaving 130 employees out of work.

Sean Orr, Rusco’s chief financial officer, felt the air leave the room that morning two weeks ago.

Renovo’s collapse marked the end of a brief chapter that began in 2022, when Audax Group, a Boston-based private equity firm, bought the 70-year-old remodeler and folded it into a national home-improvement conglomerate.

The deal promised growth, but it instead tied Rusco to a web of investors — including BlackRock TCP Capital Corp., a lending affiliate of the global asset manager BlackRock — and ultimately to a failure that rippled nationwide.

While he knew how private equity firms could operate, Orr said it was still a gut punch.

The closure illustrates how private-equity ownership can unravel in an industry flooded with investment firms buying and bundling local remodeling companies. Private-equity firms often pursue a “roll-up” strategy, buying local remodelers, merging operations and aiming to resell the combined company at a profit.

That strategy has faltered as higher borrowing costs, a cooler housing market and rising labor expenses have eroded margins.

“No company without debt goes bankrupt,” said Edward Adams, a University of Minnesota law professor who specializes in bankruptcy. “You can’t go bankrupt without debt.”

For Minnesota Rusco, one of the state’s oldest remodelers, the collapse was especially jarring. Customers were left with half-finished projects. More than 130 employees lost their jobs and health insurance.

“The locals know us, they know Minnesota Rusco, they know the jingle,” said Madeline Deems, daughter of CEO Jacob Deems. “They don’t know Renovo. It wasn’t Minnesota; it wasn’t our decision to close the doors.”

Jacob Deems learned of Renovo’s bankruptcy only hours before the meeting, his daughter said.

“Everything was just gone: the insurance, the cars, the phones,“ she said. ”It was like someone flipped a switch.”

Opheim said employees were told they would receive their last paychecks, but they have yet to receive them. Their health insurance ended Oct. 31, and they will receive no severance. Installers and subcontractors, she added, also went unpaid.

“No notice whatsoever, no warning,” she said. “It was handled very poorly and very unprofessionally by Renovo and BlackRock.”

Founded in 1955, Minnesota Rusco started as a small, family-run operation that promised to make homes warmer, brighter and better. Over the decades, it grew with its customers, adding windows, sunrooms and other upgrades through generations of Minnesota homeowners.

That family legacy ended after former CEO Jay Deems, Jacob’s father, sold the company to private equity in 2022 — a move Orr urged him to avoid.

“At that time, he assured me and the other executives that he was not going to sell the company,” Orr said. “And a month later, he turned around and was talking to the private equities.”

“I admittedly hold a slight grudge against [Jay],” she said.

Rusco had been one of the few bright spots in Renovo’s remodeling network, contributing about $7.5 million this year, Orr said. By September, it held roughly $9 million in unfinished customer projects and owed $3 million to vendors, installers and employees. “That money is gone,” he said.

Bankruptcy filings in Delaware revealed the scale of the implosion: less than $10 million in assets, more than $100 million in debt and roughly 1,000 creditors. The Chapter 7 filing sought liquidation of all remaining assets of Rusco and 15 affiliate businesses nationwide.

After the announcement, Orr gathered his accounting staff to break the news himself. Then, in defiance of Renovo’s orders, he and several employees returned to the office for the rest of the week, trying to help customers recover their materials before the systems were shut down.

They pulled job files, tracked down shipments and handed over materials to Rusco’s independent installers, urging customers to contact the installers directly so projects could still be finished.

Some customers have already filed claims against Rusco. Among the first were two Circle Pines residents who said they are owed $12,697 for an unfinished home remodeling project.

“Minnesotans are rightfully angry about their half-finished projects or unfinished projects,” Madeline Deems said. “It is heartbreaking for my family to see all of this destruction ... because all of a sudden, a $10 trillion investment company decided they didn’t want to deal with it anymore.”

Homeowners may seek reimbursement through the state’s Contractor Recovery Fund, which helps consumers recover money from failed licensed contractors. The fund paid out $2.8 million on 99 claims in 2023 and held about $9.4 million — a modest cushion against what was lost in the Rusco collapse.

The Minnesota Attorney General’s Office said it is investigating consumer complaints and has urged affected homeowners to file claims.

Now, as Orr looks for a new job, he’s drawing a hard line. His first question in every interview is simple: Are you in private equity? If the answer is yes, he walks out.

A spokesman for BlackRock declined to comment. In a statement to the New York Times, spokesman Patrick Scanlan said the collapse stemmed from “significant performance and cash flow challenges” despite investors’ efforts. Creditors installed new management and sought a buyer, but none appeared before Renovo’s board ultimately chose liquidation.

BlackRock executives told investors earlier this year that Renovo’s performance had slowed and that interest income was no longer being collected on the loan. In its second-quarter report, BlackRock TCP Capital recorded $66 million in losses tied to several restructured portfolio companies, including Renovo.

To Madeline Deems, the distinction offers little comfort. She believes BlackRock had both the power and the responsibility to ensure the companies it financed were run responsibly and ethically, but instead allowed Renovo to collapse.

In her view, the downfall of Minnesota Rusco is emblematic of a broader crisis — one in which massive financial institutions can devastate local communities while remaining insulated from the consequences of their decisions.

Adams, the bankruptcy expert, said that insulation is built into the system. Large investment firms are structured to spread losses across many holdings, which means the economic damage lands hardest on local workers, customers and suppliers, while investors can absorb the hit and move on.