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EZ Out

Ohio-based chain sells all 91 stores to unnamed buyer to even up debts

SEVEN HILL, Ohio -- After six years, EZ Energy USA Inc. is likely at the end of its run following the announcement that the convenience store chain is selling all if its 91 sites.

As reported in a Raymond James/CSP Daily News Flash on Thursday, parent company Israeli-owned EZ Energy Ltd. is selling all of its gas station and convenience store operations for $64 million to a foreign gas station operator. The company would not disclose the buyer, pending the closing of the deal.

"It's premature for us to disclose the name," EZ Energy USA president and CEO Gregg Budoi told CSP Daily News. "We've signed an agreement with a closing date scheduled for Saturday, September 15, with an outside date of October 15."

Budoi said EZ Energy USA employees were informed of the deal just recently, and he would not speculate on the future of the EZ Energy brand or company.

"Effectively, the buyer is buying all of our operating assets," he said. "So we will see what we're going to do after that and if we're going to get into a new venture or continue on [as a c-store retailer], but clearly that would require us to get some more stores."

EZ Energy USA, Seven Hills, Ohio, owns 91 convenience stores in Pennsylvania and Ohio, 22 of them dealer locations and the others company-operated under the Easy Trip brand.

Budoi would not address why the stores are being sold now; however, Israeli newspapers reported that EZ Energy USA owes $17 million to a U.S. bank and Israel's Mustang Mezzanine Fund, and $26 million to its bondholders. After repaying these debts, the company expects to report a capital gain of $10 million on the sale, according to a report in Globes.

EZ Energy's bondholders were readying for a debt settlement offer that would include a rescheduling of payments. The unexpected news of the sale sent the prices of the bonds up 55%. In February, the company defaulted on the third of the five premium payments.

Eli Zahavi is the controlling owner of EZ Energy Ltd. and has a background in the U.S. fuel industry. He founded EZ Energy in 2006, and held the debt issue in early 2007, according to Globes. The company then began buying blocks of gas stations and c-stores. It later sold the land to real-estate investment trusts (REITs) in sale-leaseback deals, while continuing to operate the properties.

The economic crisis and rise in fuel prices slashed the marketing margins of U.S. gas stations and reduced sales at c-stores, and the REITs offered less for the properties' land. As a consequence, EZ Energy was unable to buy more stations that would give it the critical mass to be profitable, the report said, and it posted a loss of $5 million in 2011 and $2.4 million in the first quarter of 2012.

Over the past few months, the company requested several postponements on the repayment of the bonds principle, and an attempt to sell the land of 16 stations to a REIT failed, partly because of the REIT's concerns over EZ Energy's financial condition and its ability to pay the rent on the properties.

EZ Energy recently turned down an offer by Arko Holdings Ltd., owners of GPM Investments in the United States, to buy half of the company's U.S. operations, and to use the proceeds to repay the bondholders, who would have had to take a loss.

"That offer expired by its terms," Budoi said. "We did not accept it within its timeframe, and they did not renew or make a new offer."

GPM, Richmond, Va., operates 213 Fas Mart and Shore Stop convenience stores and supplies more than 115 independent dealers in Virginia, Maryland, Rhode Island, Delaware, Connecticut, North Carolina, Pennsylvania, New Jersey and Tennessee.

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