no avatar

Appco owner seeks refinancing to end cash crunch

Jeff Keeling • Jan 2, 2009 at 12:00 AM

The Texas-based company that bought Appalachian Oil Co. (Appco) in September 2007 will have to wait out the weekend for an 11th-hour debt refinancing to help it overcome a recent cash crunch that has left area Appco convenience stores without gas and, since Monday, unable to sell Tennessee Lottery tickets.

Appco officials and the management team of Titan Global Holdings, which bought Appco from Johnson City resident Jim MacLean, had hoped to complete the refinancing earlier this week, then on Friday. Instead, Appco CEO Marty Anderson said late Friday that “last-minute legal details” had pushed the deal back to Monday or Tuesday.

This will leave many of the convenience stores’ crucial products — gas, lottery tickets (in the 24 Tennessee stores) and possibly cigarettes, which were going fast Friday — conspicuously absent from the chain’s 55 stores for at least 72 more hours.

Ironically, in straight operating numbers Appco made a profit of more than $20 million in Titan’s fiscal year ending Aug. 31. But because of the debt Titan incurred when it bought Appco, the company needs credit to keep operating.

Anderson said he is concerned about Appco’s 300-some employees but is confident the refinancing will set everything right. The lengthening crisis, though, has caused no small amount of worry for Appco employees and families.

Anderson is hoping the cash infusion will result in flowing gas pumps within 24 hours of money hitting Appco’s bank, with other scarce products (including lottery tickets) back to normal within a week inside the stores, where shelves have grown emptier by the day this week.

At this point, the recovery effort will include restoring vendor relationships that Anderson admitted Friday had become “strained” of late as Appco became unable to pay all its bills. He described the Tennessee Lottery’s removal of its products as “due to nonpayment of a small invoice” and said the lottery would be reinstated in the 24 Tennessee stores upon completion of the refinance.

The trouble began early in December, and by mid-December Appco had suspended the contracts of dozens of independent convenience stores for which it normally provides gas.

Anderson and Titan Global Holdings CEO Bryan Chance acknowledged as much on Dec. 24 but insisted the situation was due for a quick turnaround.

“The profitability and viability of this company is very strong,” Anderson said on Dec. 24. “We had a very good year, but our lines of credit have been squeezed down by our lender because of their difficulty getting credit.”

Anderson said Titan was working on a refinance of its debt associated with Appco to get “sufficient working capital to meet our needs,” and he expected that to be completed “any day or in the next week or two.”

SEC filings show that Titan’s primary creditor is Greystone Business Credit II, LLC. A $15 million revolving line of credit is listed in federal filings.

The filings also appear to show that Titan transferred ownership of some Appco property to help repay debt in a “modification agreement” with Greystone in the fourth quarter (June-August) of 2008. That agreement included “consent to transfer the ownership of certain parcels of real estate owned by Appco in partial satisfaction of indebtedness owed by the Company to the Crivello Group” (with Greystone, Crivello is listed in Titan’s Web site as one of its “strategic partners” under equity and finance).

Within a week of the Dec. 24 conversations, Appco stores had been hard hit by the credit situation, with most running out of gas over the Dec. 27-28 weekend.

Titan CEO Chance said Appco’s quick transition from full gas tanks and store shelves to dry tanks and partly empty shelves shows how the credit crunch can impact a local, profitable company with national ties. Titan reported that Appco produced gross profits of more than $24 million in the year ended Aug. 31, but with interests extending far beyond Appco, Titan still needs credit for Appco’s day-to-day operations to run smoothly.

Recommended for You

    Kingsport Times News Videos