Appco's two main landlords seeking termination of leases
Apr 8, 2009 at 12:00 AM
Appco faces crucial bankruptcy court hearings today that could help determine the regional convenience store operator’s ability to reorganize. Leases for nearly all of Appco’s 50-plus stores could be terminated pending hearings in Judge Marsha Parsons’ court in Greeneville. The company’s two main landlords, including its former owner, have filed motions for “relief from stay” that would allow them to end the leases for unpaid rent and evict Appco. For its part, Appco has filed a motion that would give it until Monday — 60 days after its Feb. 9 bankruptcy filing — to pay rent it owes for March and April. At the same time, Appco is attempting to get its lender, Greystone Credit, to release the final $185,000 of a $500,000 “debtor in possession” (DIP) financing agreement, which Appco claims could help it pay overdue rent on its stores. Without some additional revenue, that $185,000 wouldn’t be enough to pay overdue rent that has built up since the Chapter 11 bankruptcy filing. The two primary landlords claim that between them, they are owed more than $700,000 since Feb. 9. (“Pre-petition debts” are protected during Chapter 11 proceedings, though Appco owes the two landlords more than $500,000 from before the bankruptcy filing.) A Texas company, Titan Global Holdings, paid longtime owner James MacLean and partners $30 million for Appco in September 2007. MacLean still owns the buildings and land of 33 of the stores, as well as Appco headquarters and some other property used by Appco. Titan borrowed most of the money to buy Appco, and to de-leverage itself sold another 17 properties back to some of its investors, who own them under the name YA Landholdings — the second major landlord. Appco’s financial struggles began in the late fall of 2008, and by the first of the year Appco stores were without gas or lottery tickets while groceries, cigarettes and beer were dwindling fast. When Appco filed, it owed “unsecured creditors” more than $7 million. Greystone Credit is owed more than $11 million and is a “secured creditor,” meaning that any of Appco’s assets would go to pay off Greystone before unsecured creditors could get any of the pre-petition monies they are owed. Appco claims in its “motion for additional time to meet debtor’s obligation,” filed Thursday, that it should have until at least next Monday “or such additional time as the court may deem proper,” to pay its March and April rent. It cites progress in getting the Appco stores back up and running during the past several weeks. Appco reached several DIP financing agreements March 13 after several weeks of effort. They included the $500,000 DIP with Greystone and several “trade fi nancing” agreements with gas and grocery suppliers. The week of March 16, Appco began selling gas and groceries — although Frito-Lay, Little Debbie and Dr. Enuf are among several vendors that still have yet to return to Appco — and the company claims in its motion that “sales volumes on groceries and gas continue to grow with healthy margins on both products.” An attorney representing MacLean’s property interests filed a response on Monday to Appco’s motion for extra time to pay, asking that it be denied. That response says that even if it uses the last $185,000 of Greystone’s DIP financing, which “is less than half of what is currently due and owing on (MacLean’s) leases alone. It is not even enough to sat isfy what (Appco) admits it owes.” The motion by MacLean’s attorneys to require payment of all rents due or allow lease termination is set to be heard today, along with Appco’s request for the last of its DIP financing to be released. YA Landholdings’ request to be allowed to terminate leases is set for April 21.