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GREENVILLE, Tenn. – The sale of Appalachian Oil Co.’s (Appco) assets moved a little closer to realization as the real estate company leading the sale of the bankrupt convenience store chain mulls over bids this week.
According to a report by TimesNews.net, Appco’s Chief Restructuring Officer Andy Weber said Friday he is hopeful the company’s 47 c-stores will still be in operation and turning a profit for new owners in the not-too-distant future.
"The sales procedures approved by the court require a closing within 30 days, so our expectation would be that by the middle of August a transition would take place with the new ownership," Weber said Friday.
Appco filed for Chapter 11 protection Feb. 9 and Weber, who works for Chicago-based NRC Reality Advisors, was appointed April 14, to oversee the bid and sale process. Weber said "We hope to have a final selection by the end of next week (this Friday)."
According to Weber, it is still uncertain whether all the stores will be acquired by one company, or if they will be split up among several purchasers. Appco’s nearly $20 million in pre-bankruptcy debts include more than $11 million in "secured debt" to lender Greystone Business Credit, and more than $7 million in debt to dozens of unsecured creditors ranging from gasoline suppliers and landlords to Western Union and Pet Dairy, said the report.
Appco was originally purchased for $30 million by Dallas-based Titan Global Holdings in a leveraged buyout deal in September 2007. At the time, the company consisted by about 55 stores in Northeast Tennessee, Southwest Virginia and Southeast Kentucky, and supplied fuel to about 165 independent convenience stores as well.
After the sale, longtime owner Jim MacLean retained ownership of some of the store buildings and real estate, while Titan immediately sold the buildings and property it obtained for $15 million to pay down debt, according to the report.
Titan, though, experienced financial difficulties with various other companies it owned and soon Appco’s profits became the main entity funding Titan itself, according to Timesnews.net. With Titan siphoning off more than $3 million in a one-year period, Appco ran into trouble—especially as oil and gas prices soared in 2008.
In December, the Tennessee company could no longer supply its independent dealers, and fell behind on its bills. Titan continued to run the company after the February bankruptcy filing, but it quickly became clear that only a sale would result in creditors having any chance at recouping some of their money owed.
To make the sale possible, former owner MacLean had to split his master lease into several smaller components and agreed to renegotiate the lease prices. These moves helped pave the way for a sale, with the break-up into smaller leases increasing the field of potential owners to smaller operators who might want to buy just a few stores, or even just one, according to the report.
Since the bankruptcy filing, Weber has also overseen the closing of about half a dozen Appco stores, mostly in Virginia and Kentucky. Appco’s dealer business is gone, so many central office functions are likely to be eliminated after the sale.
The remaining stores have been profitable before, and Weber believes they can thrive again, according to the report. They have lost an average of $1 million a month since the bankruptcy filing, but Weber said that’s not unusual in these types of cases.
"There is usually some performance interruption," Weber said. "We know what the stores have done historically, and in this particular case, the stores were not operational for several months, other than having the lights on (essentially January through late March)."
That disruption, he said, means the "interim performance levels" aren’t representative, said Weber. Appco has been getting debtor in possession (DIP) financing from Greystone since late March.
In addition to the 47 stores (and five "fee-interest" sites that are former gas stations with no deed restrictions), NRC is marketing the Appco name and trademark.
"While a single buyer might purchase and retain the name if the sale goes that direction, it is possible that there will be many buyers, and an investor could purchase the trademark and license it to other buyers, and perhaps even other stores outside of the company," said Weber.
If not, Appco’s several hundred store employees (both clerks and managers) likely will find themselves trading in their uniforms at some point—but not necessarily their jobs.
"We have a strong core of loyal store managers that have helped us get here," Weber said. "They generally have the most job security with their specific knowledge and customer relationships."
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