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BLOUNTVILLE, Tenn. -- Appalachian Oil Co. Inc. (Appco), operator of 55 convenience stores based here, filed Chapter 11 at the U.S. Bankruptcy Court Eastern District in Greeneville Monday, citing liquidity issues stemming from the recent credit crunch, Tricities.com reported. The move comes just two days after its sister company, Crescent Oil Co., filed for Chapter 11 bankruptcy protection over the weekend.
As reported by a CSNews Online newsflash yesterday, Bryan Chance, president and CEO of Appco’s parent company, Titan Global Holdings, said the cause for the filing was high gas prices and difficulty getting financing, according to the report. Calls to Chance and Appco CEO Marty Anderson were not returned by press time.
Chance added the company will do all it can to keep its stores and workers, but could not rule out lay offs or closures. CSNews Online reported yesterday that it has been more than a month since published reports began questioning instances of empty fuel tanks, lack of products and a stoppage of lottery sales at Appco stores. Nearly all vendors weren’t stocking products at Appco stores unless they could be paid in cash, and store hours were cut from 6 a.m. to 6 p.m.
In early January, Chance announced a debt refinancing would return the chain to normal operations, yet there was never confirmation that money was obtained.
"Our parent company is responsible for all the financing of our company, and they are diligently working on a refinance that will bring some working capital into the company," Anderson said in a TimesNews.net report last month. "Myself and everybody in this company is fighting night and day to hold the thing together. We’re waiting for refinancing. We hope it will happen any day now."
A report in the Kingsport Times News stated Appco’s five largest creditors are owed more than $1 million each, and the filing suggests they will be able to collect on their debts, according to the report. Of Appco’s top seven creditors, six supplied fuel and debts to those firms total $8.2 million. The non-fuel creditor is grocery and tobacco supplier LP Shanks of Crossville, which is owed $1.4 million, the report stated.
The filing reads "Debtor estimates that funds will be available for distribution to unsecured creditors," according to the Times News.
The report stated Appco's second-largest creditor listed in the filing, with $1.65 million owed for fuel, is its sister company, Crescent Oil Co., which itself filed for bankruptcy Saturday in the U.S. Bankruptcy Court in Kansas City, Kan. Crescent Oil is a fuel supplier to more than 340 gas retailers across six states in the Midwest.
Meanwhile, federal bankruptcy judge Robert D. Berger approved of a plan this week that will let Crescent Oil start supplying fuel to its customers and obtain financing that will let it keep operating until its assets can be sold, the Associated Press reported yesterday. Berger also approved a motion that will allow all of Crescent's employees to be paid.
Lisa Epps, an attorney for Crescent, said the ruling will allow the company to start buying fuel and filling up its customers' tanks "hopefully immediately," according to the report.
Crescent owes its primary secured creditor, M&I Marshall & Ilsley Bank, more than $37 million, and under the agreement, M&I will provide Crescent with a $3.3 million revolving line of credit, and ConocoPhillips will provide $950,000 in credit support, the AP reported.
"The agreement approved today enables the debtor to operate within a budget through bankruptcy," Epps said, adding a credit adviser will be hired to help the company with the liquidation process.
A final hearing on the bankruptcy petition is scheduled for March 10, the AP reported.
The past two years were financially rough for Crescent, which saw estimated losses of $12.8 million last year on $910 million in revenue, and $3.5 million in 2007, according to the report.
The 2008 losses were blamed on "extremely volatile fuel prices and margins," as well as more than $2 million in losses from acquiring and developing new convenience stores, along with high interest rates and financing costs, the report stated.
The results of the filings by the companies will depend on several factors, Milligan College economist Bill Greer told the paper. "Chapter 11 is generally applicable to a business that is a viable, going concern," he said. "It just needs to be assisted through a transitionary period because of accumulating too much debt, for whatever reason, and Chapter 11 gives a company time to restructure again."
However, in other cases, he added, "If you’ve milked your cash cows for all they’re worth, that strategy’s run out of steam. You can’t continue to perpetuate it."
Appco was founded in 1923 and operates c-stores in Northeast Tennessee, Southwest Virginia and Eastern Kentucky. It's also one of the Southeast’s largest distributors of branded and unbranded petroleum products, serving wholesale customers in Tennessee, Kentucky, Virginia, West Virginia, and North and South Carolina.