Bankruptcy Court Denies Sale of Family Christian Stores
The drama of Family Christian Stores is now officially in overtime. Here’s some of the report from Publisher’s Weekly (19/June), but you need to click through for the full story:
A United States Bankruptcy Court has denied the sale of Family Christian Stores, the largest retail Christian chain in the country, to FCS Acquisition (a company founded by FCS owners to buy back the business). The ruling was detailed in a memorandum decision filed on Thursday in Grand Rapids, Mich.
Family Christian Stores, which has 266 locations in 36 states, filed for bankruptcy in February after several years of falling sales.
The denial of the sale motion was based on several factors: Hilco Merchant Resources, LLC, and Gordon Brothers Retail Partners LLC (Gordon/Hilco)–both liquidators–made bids on the chain, and both have standing to object to the sale. Additionally, the auction process during which FC Acquisition was named the “highest and best” bidder included several mistakes, though the court said it ultimately did not “find that the auction was unfair or fraudulent.”
The court was especially troubled by a telephone call from Family Christian CEO Chuck Bengochea to FC Acquisition owner Richard Jackson during the sale auction, asking him to increase FC Acquisitions’ bid.
A third objection says that the debtors “failed to articulate a sound business justification for the sale to any of the bidders.”…
…The decision comes nine days after a 14-hour hearing in Grand Rapids on June 9 that began at 9 a.m. and ended just after 11 p.m.
A longer story appears at MLive (Michigan Regional News) and notes:
…The judge said the clock is ticking for the company if it wants to remain a viable business. It will have a “liquidity crisis” with cash reserves likely depleted by mid to late July.
…If Family Christian Acquisition’s had been approved, Bengochea planned to close 15 or 16 stores as part of a five-point restructuring.
With several bidders planning to liquidate the company, many creditors, including publishers who would lose millions in the bankruptcy, backed Family Christian Acquisitions’ bid as a way to keep the company afloat and continue as an important distributor of their products.