In an interview Friday, Andy Weber, whom bankruptcy Judge Marsha Parsons appointed as Appco’s “chief restructuring officer” on April 14, said that despite the challenges of a bankruptcy now four months old, Appco has several good things going for it. Weber, a senior vice president with NRC Realty Advisors, also explained the rationale behind some of the hard choices he’s made since wading into a troubled company he knew little about.
Weber said his task was to “have an operating group (of stores) with long-term viability for which the market is willing to pay the best value.
“To get there, we have had to be creative with our landlords, rebuild trust with our suppliers, and reconnect with our customers.”
Weber said if a “global agreement” that satisfies Appco’s lender, its landlords and its unsecured creditors is approved Wednesday, the pieces should be in place to get some good bids from parties that have been sniffing around since it became clear in April the 55-store chain would be sold. That agreement will allow Appco to shed unwanted leases, including some for lower- performing stores that won’t make the cut in the sale and will likely close.
Weber has also had to try to mend fences with suppliers, many of whom got burned during Titan Global Holdings’ 18-month ownership tenure, and he said “we have had to convince our customers that Appco can have the products and services they need.” Those pieces required the “secured creditor,” Greystone Business Credit, being willing to provide a “debtor in possession” financing even though Appco owes it more than $11 million.
Without both the financing and the pending new lease agreements — including both lease rejections and renegotiated rents on some of the properties Appco wants to keep — Weber said “it would be very hard to re-create and sell the value of the business.”
That value has retained itself to what Weber considers a surprising degree, despite the troubles that began around December for Appco and resulted in poorly stocked stores, gas outages, and unpaid bills to unsecured creditors — everyone from large gas suppliers to snack suppliers — that total more than $7 million.
Titan paid longtime Appco owner Jim MacLean and partners $30 million for Appco in September 2007, and Weber suggested the company’s good name pre-Titan is still worth something.
“Because of its local history and the schematics, we have heard from many people about buying the brand name. We didn’t really expect that coming in.”
Weber’s profile on NRC’s Web site says one of his specialties is “distressed/restructuring advisory in all retail industries with specialty focus in convenience retail and gasoline distribution,” so he has seen troubled “C-store” chains before. He said Appco has been fortunate to retain a strong store management team through the crisis and would be surprised if a buyer wouldn’t want to take advantage of that existing asset.
“Our store managers are the ones who make our business,” Weber said.
“They know their customers and have done a great job with limited resources over the past months. New owners would benefit from retaining them, and in most transactions the store staff are retained for exactly these reasons.”
He called Appco “fortunate” to have held on to as many store managers as it has during the its challenges, and said the company’s regional supervisors and office group are equally valuable.
Because of Appco’s struggles, though, some of the store personnel won’t make the cut, and the likelihood of a buyer retaining office staff is uncertain. Several of the 55 stores already have been closed, most in Virginia and Kentucky.
“Through the bankruptcy process, we have winnowed out non-performing stores and bad leases, which is what the bankruptcy process supports,” Weber said.
As for the administrative staff, whether a buyer would need to retain most of them may depend on whether there are only a few buyers taking large groups of stores or many individual buyers taking single stores, Weber said, adding that “our management is able and willing to assist buyers on a go-forward basis.”
If Judge Parsons approves the global settlement this week, Weber said his company will try to move into the final stages of marketing and sale.
“What is remaining (in terms of stores) has demonstrated strong profitability in the past, and the store locations are on good real estate with a strong future ahead,” Weber said. “Of course, the store managers and other employees are a great intangible.”