Way back in February I posted about the Chapter 11 bankruptcy of Family Christian Stores. I noted here that the bankruptcy petition of FCS was accompanied by a motion to sell the assets of all the stores to an entity (FC Acquisitions) controlled one of its previous owners, Richard Jackson, that also had become one of its largest creditors by buying the operating loan from the original bank lender. Read all about it here and here.
Everyone and his cousin objected to the sale; it seemed a bit too cozy and potentially unfair to the creditors, some of whom claimed they actually were consignors that owned the inventory of FCS, as well as other potential bidders. In any event, the initial bidder withdrew its bid and the entirety of the assets of FCS went to an auction that began last Thursday.
Five days after the auction began, the highest bidder, at least in the opinion of FCS and some of its creditors, was--wouldn't you know it?--the very same entity controlled by the very same multi-hat-wearing Richard Jackson. Read some news accounts here and here.
The decision of FCS to declare the bid of FC Acquisitions the highest is not, however, the end of the story. There were other bidders, the well-known (well-known to me, anyway) liquidation firms of Hilco and Gordon Brothers, who assert that their bids were actually higher than the one from FC Acquisitions.
Such a result is not as peculiar as it might seem because no one is bidding a straight-up cash offer. Each of the bidders is offering to assume some existing debt and to pay the balance of the purchase price over time as the inventory and some other assets are sold. Thus, there will be a hearing before the bankruptcy court next week to decide whose bid is really the highest.
Given their intertwined relationship, it's not surprising that FCS claims that Jackson's bid is the best. It will be more interesting to see which sides which creditors take. Those with whom FC Acquisitions will continue to do business might be willing to take a hit now in the hope of getting more sales in the future. Other creditors, who won't be continuing to do business with the new Family Christian Stores, will fight for the highest and quickest cash payout. Still other creditors, like landlords, will split depending on the market value of the leases, how long they have to run, and how much they trust Jackson and the new Family Christian Stores to be able to honor the leases going forward.
So much fun it makes me want to quit teaching and get back into the practice of bankruptcy law. In any event, Stay tuned!
Five days after the auction began, the highest bidder, at least in the opinion of FCS and some of its creditors, was--wouldn't you know it?--the very same entity controlled by the very same multi-hat-wearing Richard Jackson. Read some news accounts here and here.
The decision of FCS to declare the bid of FC Acquisitions the highest is not, however, the end of the story. There were other bidders, the well-known (well-known to me, anyway) liquidation firms of Hilco and Gordon Brothers, who assert that their bids were actually higher than the one from FC Acquisitions.
Such a result is not as peculiar as it might seem because no one is bidding a straight-up cash offer. Each of the bidders is offering to assume some existing debt and to pay the balance of the purchase price over time as the inventory and some other assets are sold. Thus, there will be a hearing before the bankruptcy court next week to decide whose bid is really the highest.
Given their intertwined relationship, it's not surprising that FCS claims that Jackson's bid is the best. It will be more interesting to see which sides which creditors take. Those with whom FC Acquisitions will continue to do business might be willing to take a hit now in the hope of getting more sales in the future. Other creditors, who won't be continuing to do business with the new Family Christian Stores, will fight for the highest and quickest cash payout. Still other creditors, like landlords, will split depending on the market value of the leases, how long they have to run, and how much they trust Jackson and the new Family Christian Stores to be able to honor the leases going forward.
So much fun it makes me want to quit teaching and get back into the practice of bankruptcy law. In any event, Stay tuned!
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