OVERLAND PARK, Kansas -- Describing the circumstances behind his 42-store chain’s Chapter 11 bankruptcy filing and road back to recovery, David George, president of Gas-Mart USA Inc., said an arduous inspection of stores, the securing of a $1.5 million debtor-in-possession (DIP) loan and long talks with supportive suppliers will turn the business around in the coming year to 18 months.
After filing for Chapter 11 in U.S. Bankruptcy Court in the Western District of Missouri earlier this month, George spoke to CSP Daily News to shed light on court documents, some of which described the infighting between major shareholders, a distraction that he said contributed to the chain’s troubles.
“We are in Chapter 11, which is a reorganization, not a Chapter 7, where it’s about liquidating everything,” George said. “We’ll be able to able to show our fuel companies, vendors and lenders that we do have the ability to reorganize.”
The filing involved Gas-Mart and three other entities—Aving-Rice LLC, Fran Transport & Oil Co. and G&G Enterprises—all related to the convenience-store operations, George said, with cash flow problems reaching critical levels in recent months.
“It was a self-fulfilling prophecy,” George said. “You have less product, then less business, then less sales.”
Legal disputes going back five years between the two 50-50 shareholders in the company didn’t help. George explained on his side, the shareholders of Gas-Mart (David George, Michael George and the George Family Trust) have had an ongoing dispute with the Abraham J. Gustin Revocable Trust and Gregory J. Gustin (Abe Gustin died in 2010). George describes the core dispute being the valuation of a buy-sell agreement between the entities.
“We followed the letter of the agreement and Abe’s estate rejected it,” George said. “It was part of the reason for [the bankruptcy filing], but we had cash flow problems.”
George takes the story of their current financial state back to a successful and essentially positive sale of 19 sites back in October of last year to TravelCenters of America, Westlake, Ohio. He called it “a great transaction,” one that brought the chain their current CEO, John Tittle Jr.
Tittle came to Gas-Mart with what George describes as an “impeccable” resume, having worked with among others, the American Bankruptcy Institute, Alexandria, Va.
“We hired him in October to conduct the sales process,” George said.
Now, after the July 2 bankruptcy filing, Gas-Mart was able to get a $1.5 million DIP loan from the Missouri Bank in Kansas City, Mo., a step that will help ease the minds of suppliers needing to put fuel and groceries back into the chain’s stores, George said.
At press time, George was in negotiations with its major fuel suppliers, ConocoPhillips and CITGO, and were in talks with grocery suppliers as well. “We’ve had no fuel or very little in our stores,” George said, not elaborating on how long they had been in that state.
Describing the road back, George said, “We have good locations, but we’ve neglected them.”
Staff has now been directed back out into the field, with Tittle himself driving to all their locations spread over five states, which include Wisconsin, Indiana, Illinois, Iowa and Nebraska. George said they now have accurate projections of what each store needs to get back on track. He expected to have fuel in the ground by the weekend and groceries in the stores by next week.
“It’s been an extreme amount of work,” he said. “But we have a strong plan to emerge from bankruptcy.”
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