You are here
GREENEVILLE, Tenn. -- A bankruptcy judge granted Appalachian Oil Co. (Appco)a reprieve from its landlords, who are demanding overdue rent payments, according to the Kingsport Times-News.
Judge Marsha Parsons could have let Appco’s main landlord—the chain’s former owner, Jim MacLean—terminate leases on more than 30 stores, but she chose to grant the extra time instead, based on a motion to postpone payments until 60 days after the Feb. 9, Chapter 11 bankruptcy filing.
Even though Appco won other victories in court, Parsons questioned whether the company was "just buying time" and ultimately would fail in its bid to reorganize under Chapter 11 bankruptcy protection. However, the judge did chastise the attorney for Appco’s lender for not releasing $200,000 in a $500,000 "debtor in possession" (DIP) financing agreement reached March 13. That agreement allowed Appco to resume selling gas and groceries at its 58 stores starting the week of March 16.
Appco’s landlords and its main creditor, Greystone, all appeared much more certain Appco would not make it, but Parsons postponed ruling on their bids for lease termination and thus, evictions. The judge also ruled that Appco would not have to pay prorated "post-petition" rent for February 9-28, which totaled more than $300,000 between all Appco’s landlords.
But even with the break from February, Appco still owes its landlords nearly $700,000 for March and April rents. Appco’s attorney, Mark Dessauer, also asked Parsons Wednesday to force Greystone Credit to release the disputed $200,000, but Dessauer also admitted $200,000 wouldn’t be enough to pay all the past due rent. He said he hoped for some "installment plan" for Appco.
Greg Logue, representing MacLean, suggested the judge should allow lease terminations to proceed if rent isn’t paid in full next week.
While Appco reportedly paid MacLean's companies $75,000 a couple of weeks ago, that was half of what it had budgeted in its financing arrangement. Appco’s lower-than-budgeted payment may have been due to its inability to meet revenues it forecast when it arranged for financing with Greystone, according to Greystone’s attorney, Glenn Rose.
Rose pointed out Appco had generated less than a third of its estimated $4.97 million in sales for March 16, through April 1; even in the most recent week, March 30-April 3, it produced barely 40 percent of Appco’s estimated $2.4 million in sales.
Rose said Greystone already funded Appco more than $1.2 million since the bankruptcy, but is willing to put in the $200,000 and potentially more "if we move forward with a sale process."
"This case is now more than 60 days old, and I think under any measure of examination (Appco) has not performed," Rose stated. "We believe the best approach is to find a way to keep operations going to see if there’s an interested buyer out there, and that process has to happen quickly in order to have funds available."
When the case reconvenes next Tuesday, unless MacLean and other landlords have been paid up, their lawyers can argue for a "relief from stay" that would let them begin lease termination proceedings, reported the Times-News. That would likely cause the case to be converted to a Chapter 7 (liquidation) bankruptcy.
-- Two Appco Stores Re-open
-- Appco Landlord May Evict Stores
-- Appco Re-Stocks Stores Thanks to Refinancing
-- Appco Files Chapter 11 Bankruptcy