Lawyers for Management Properties Inc. — which manages 33 Appco stores and numerous other Appco properties for former owner Jim MacLean — filed for “relief from the automatic stay” that typically protects bankrupt companies from their creditors. Alternatively, the motion asks for “adequate protection” or a guarantee Appco and its current owner, Titan Global Holdings, can assure MP will get back rent it is due since Appco’s Feb. 9 bankruptcy filing.
A hearing on the motion is set for April 8, the day after Appco’s final hearing on its “post-petition” financing. Two weeks ago, Appco worked out last-minute, temporary financing agreements with its secured creditor, lender Greystone Credit, and several vendors who agreed to trade financing terms.
The budget for that March 13 agreement projected Appco paying MP $150,000 from store proceeds for the week of March 16, but Wednesday’s motion claims Appco paid MP just half that amount on March 20. According to the motion, Appco still owes MP $198,362 in “post-petition” rent (amounts owed before the Feb. 9 Chapter 11 filing are subject to a different set of rules), and $162,854 in additional rent will be due Wednesday.
The automatic stay portion of bankruptcy law provides a period in which all judgments, collection activities, foreclosures and repossessions of property are suspended and may not be pursued by the creditors on any debt or claim that arose before the filing of the bankruptcy petition.
Wednesday’s motion, though, applies only to rent due since Appco’s Chapter 11 filing.
Jeff Benedict, president of Management Properties and the former CEO of Appco, said Wednesday’s filing was not his company’s preferred alternative.
“Our very strong preference is for Appco to pay their rent and continue on with their business plan,” Benedict said Thursday. “However, if that proves impossible, we need to be able to move to protect ourselves.”
Benedict said that unlike other creditors who can simply withhold goods or services during a bankruptcy, landlords may have no recourse other than to pursue lease termination to avoid ever-increasing debts.
“The motions ask that the bankruptcy court either assure us that the rent will be paid or allow us to seek the return of the properties,” Benedict said, adding that in addition to the 33 Appco store sites there are about 30 related properties. The filing lists some as non-Appco branded convenience stores and others as Appco properties, such as its main office in Blountville.
“Unfortunately, there is a great deal of rent past due, as well as the 2008 property taxes on the properties, which under the leases Appco was obligated to pay,” Benedict said. “Because the unpaid rent increases with every passing day, we need to be in a position to recover the properties if that becomes necessary.”
Attorney Greg Logue’s motion cites several subsections of the bankruptcy code he claims Appco has violated, and claims Appco “has indicated an inability to cure the existing defaults or make future payments as they become due.”
The motion claims Appco hasn’t cured its lease defaults, nor has it provided “adequate assurance” it will pay MP for any loss resulting from the default.
Titan Global Holdings purchased Appco from MacLean and partners in September 2007 for $30 million. It operates 57 Appco stores.
Appco’s financial fortunes took a noticeable turn in December, and it owes unsecured creditors (including MP) more than $7 million from before the Feb. 9 Chapter 11 filing.