CINCINNATI -- The future of more than 60 regional Ameristop convenience store franchises likely will not be decided until late February, reported The Cincinnati Enquirer.
In November, Petro Acquisitions Inc., the parent company of the Cold Spring-based Ameristop chain, filed for Chapter 11 bankruptcy with debt estimated between $1 million and $100 million, according to court documents cited by the newspaper.
As reported in CSP Daily News, a hearing held Thursday in U.S. Bankruptcy Court in Cincinnati was expected to determine whether the franchise agreement could be terminated and [image-nocss] if the prime leases on 63 convenience stores could be sold at auction to the highest bidder free of any liens or sublease agreements. Selling the assets would go to pay off more than $11.2 million Petro owes to Wells Fargo Bank and Drawbridge Special Opportunities Fund for financing it got to pay for bankruptcy proceedings, according to court documents.
Franchisees, which sublease their stores from Petro, have objected to selling the prime leases, the report said. They argue that such a move would violate their rights under federal bankruptcy laws and could put them out of business. Conversely, Wells Fargo and Drawbridge have argued that the leases are fair game for an auction, which is the best course of action in order to recoup money owed to the two entities.
Prior to Thursday's hearing, however, the franchisees and lenders agreed to an alternative solution offered by Petro's assigned trustee, Richard Nelson of Cohen, Todd, Kite & Stanford. The report said that Nelson asked the court to delay its decision on the contested issues until February 20, and allow an auction of Petro's assets and the prime leases to move forward February 14 and 15.
Under the agreement, the prime leases will be offered at auction in the following ways:
Individually, with an agreement by the highest bidder to adhere to the terms of any sub-lease in place. This option also would be offered to bidders as an entire package of subleases. Individually, with no agreement to adhere to sub-lease arrangements, but contingent to the court's decision on Feb. 20. Similar to the first offering, this option also would be offered to bidders as an entire package of subleases. Packaged as part of an offering for the rights to the Ameristop franchise in full.Lawyer Marcia Andrew of the Cincinnati law firm Taft Stettinius & Hollister, representing the franchisees, said the agreement buys her clients time and hope. "If we didn't make this agreement we were going to have to make a choice to go all or nothing on a hearing this week," she told the paper. "We think the way the trustee has broken out these options will give the franchisees the fairest chance to come through this auction and still be in possession of their stores."
In the meantime, franchisees are working through the legal thicket with hopes of being a player in the upcoming auctions, said Lance Little, who owns several franchises in Northern Kentucky. "It's very confusing, and there are a lot of different things that can happen," he told the Enquirer. "For now we're the ones running the stores to keep these prime leases alive, and we just hope that we either get our independence or have our stores connected to a good franchisor."
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.