In short, simultaneously with the filing of the case, FCS proposed to sell its assets to a pre-positioned bidder. Such an approach is not unusual--most retail Chapter 11 bankruptcies end in sales rather than reorganizations--but in this case the buyer was an affiliate of the previous owner who also happens to be the second largest creditor of the chain: an entity belonging to Richard Jackson.
It appears I'm not the only one who is a bit skeptical about the close relationship between debtor, lender, and buyer. Several creditors have objected to the terms of the proposed sale but the most thoroughgoing objection has come from the largest of the creditors of FCS, Credit Suisse, who provided a $38 million term loan secured by "copyrights, domain names, patents, trademarks and licenses, equipment, fixtures, goods, investment property, letter-of-credit rights, pledged collateral, and commercial tort claims." Credit Suisse also has a junior security interest in the inventory and accounts receivable of FCS but it is subordinate to the security interest in those assets held by ... the Richard Jackson-controlled entity. And that junior interest is worth precisely ... nothing.
Credit Suisse's objection to the hurry-up sale is a model of circumspection but one doesn't have to be a prophet to read between the lines. At this point Credit Suisse is objecting only to the speed of the sale and the attempt by FCS to limit any competing bid to the precise terms of Jackson's offer. I suspect the Bankruptcy Court will slow down matters a bit but it remains to be seen whether any other bidders materialize. The contemporary world of on-the-ground sales is a tough and one wonders if Jackson, even if the successful bidder, will be able to make a go of the business even after flushing lots of its debt down the drain.
Update: Since I wrote this post Family Christian Stores has bowed to the inevitable and withdrawn its motion to sell its assets. Stay tuned.