Judge Marsha Parsons could have let Appco's main landlordthe chain's former owner, Jim MacLeanterminate leases on more than 30 stores, [image-nocss] but she chose to grant the extra time instead, based on a motion to postpone payments until 60 days after the February 9 bankruptcy filing. YA Landholdings, which owns the property and buildings of 17 stores, also is seeking rent payments, as are several single-property landlords, said the report.
Appco won a couple of other victories Wednesday, but even Parsons questioned whether the company was "just buying time" and ultimately would fail in its bid to reorganize under Chapter 11 bankruptcy protection. The judge did, however, chastise the attorney for Appco's lender for not releasing $200,000 in a $500,000 "debtor in possession" (DIP) financing agreement reached March 13. That agreement allowed Appco to resume selling gas and groceries at its 58 stores starting the week of March 16, the report said.
Appco's landlords and its main creditor, Greystone, all appeared much more certain that Appco would not make it, but Parsons postponed ruling on their bids to allow lease termination and thus evictions. The judge also ruled that Appco would not have to pay prorated "post-petition" rent for February 9-28, which totaled more than $300,000 between all Appco's landlords.
Even with the break from February, Appco still owes its landlords nearly $700,000 for March and April rents. Appco's attorney, Mark Dessauer, also asked Parsons Wednesday to force Greystone Credit to release the disputed $200,000, but Dessauer also admitted $200,000 would not be enough to pay all the past due rent.
"If your honor orders that all the money has to be paid on the 13th, I can't represent that the debtor would be able to meet those obligations," Dessauer said, adding that he hoped for some "installment plan" that would get Appco caught up on rent by the end of May. According to the report, he told Parsons that if Appco got the final $200,000 from Greystone Credit, "hopefully we can engage in favorable negotiations with Mr. MacLean and his companies" on paying rent.
Greg Logue represents MacLean and suggested the judge should allow lease terminations to proceed if rent isn't paid in full next week. "He [Dessauer] wants to say we're adequately protected by a promise to pay rent sometime down the road," Logue told the newspaper. "To me, what should be looked at is, 'what's the rent, and how are we going to get paid?'."
While Appco paid MacLean's companies $75,000 a couple of weeks agohalf what it had budgeted in its financing arrangementYA Landholdings attorney said they had received no rent since November 1 (pre-bankruptcy debts are protected during the Chapter 11 process).
Appco's lower-than-budgeted payment may have been due to its inability to meet revenues it forecast when it arranged for financing with Greystone March 13. Greystone's attorney, Glenn Rose, said the lender balked at releasing its final $200,000 mainly because Appco was coming nowhere near meeting its revenue projections.
Greystone's refusal to fund the $200,000 didn't sit well with Parsons, and she let Rose know it in no uncertain terms, said the report, but Rose stuck to his assertion that if Appco didn't at least coming close to meeting budget, Greystone's continued funding might be pointless.
Rose pointed out that Appco had generated less than a third of its estimated $4.97 million in sales for March 16 through April 1, and even the most recent week, March 30 to April 3, produced barely 40% of Appco's estimated $2.4 million in sales.
"The only implicit purpose in having a budget is that you have to operate at least close to that budget," Rose said before floating the idea of a sale, according to the paper,
He said Greystone has already funded Appco to the tune of more than $1.2 million since the bankruptcy, but is willing to put in the $200,000 and potentially more "if we move forward with a sale process." "This case is now more than 60 days old, and I think under any measure of examination [Appco] has not performed," Rose said. "We believe the best approach is to find a way to keep operations going to see if there's an interested buyer out there, and that process has to happen quickly in order to have funds available."
When the case reconvenes Tuesday, unless MacLean and other landlords have been paid up, their lawyers can argue for a "relief from stay" that would let them begin lease termination proceedings, said the Times News. That, in turn, likely would cause the case to be converted to a Chapter 7 liquidation bankruptcy, the report said.
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