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STATE COLLEGE, Pa. -- Uni-Marts LLC along with six subsidiaries filed voluntary petitions yesterday under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The company, which operates 283 company- and dealer-operated c-stores, will continue to operate its stores without interruption while it reorganizes and will continue to pay its employees, according to a statement filed by the company's lawyer.
With yesterday's filing, the company has the ability to pursue a dual path to maximize returns to its creditors. To do so, the company is restructuring its balance sheet and renegotiating unfavorable leases, while closing underperforming locations. In addition, Uni-Marts is also exploring opportunities to sell the company.
"We have been talking to a buyer and expect to announce it some time next week," Tyler Brown, a lawyer with Hunton & Williams LLP told CSNews Online.
Since hiring Matrix Capital Markets Group as its investment banker in September 2007, several investors have been interested in purchasing the company's stores.
"There has been significant interest in Uni-Marts among potential strategic buyers. Uni-Marts is well known in the industry as a solid performer, and the business will fit nicely into other existing chains," Thomas E. Kelso, managing director of Matrix, said in a statement. "A bankruptcy sale creates a real opportunity for the right buyer."
Brown told CSNews Online Uni-Marts is expected to file a court motion next week for approval of a bidder to purchase substantially all of the operating assets, and that the company also will seek approval of a competitive bidding and auction process to offer other interested bidders an opportunity to win the right to purchase the stores and supply operations.
"We didn’t want to file [Chapter 11] until we knew we had a buyer," said Brown. "We plan to put it out there to see if other buyers want to beat the price."
According to Henry Sahakian, Uni-Marts founder and CEO, "The overall condition of the economy, aggressive competition in the areas in which we operate, increased fuel and other inventory prices, and other matters outside our control have reduced the company's cash reserves, which prevented us from executing our business plans and tightened our operating margins," he said in a statement.
Adding to the challenges was a January 2007 lawsuit filed by dealers and operators related to Uni-Marts' sale of stores to the dealers. CSNews Online reported in January 2007 the operators sued the company for fraud and breach of contract, claiming the company and its real estate and financial firms misled them about operating costs and profitability. Then, in October, the company paid $2 million to settle the lawsuit.
"While we do not believe the company committed any wrong-doing, we agreed to settle the matter in November 2007 in order to avoid further litigation costs. The costs of defending and settling the litigation substantially reduced our cash reserves," he added.
The company is currently in litigation with its insurer, as the insurance company denies coverage for this matter.
Additionally, in recent years the company has taken back 61 dealer-run store locations when dealers were no longer able to satisfy ongoing obligations, resulting in significant time and funds exceeding $8 million dedicated to restock, renovate, re-equip, address prime landlord obligations and reopen stores.