RICHMOND, Va. -- When Rennie Petroleum Corp. filed for Chapter 11 bankruptcy re-organization in January, CEO Donald J.Rennie said there were no plans to close the chain's 24 convenience stores. Both Rennie and company lawyer David Spiro expressed optimism that the protection from creditors would enable it to adjust and return to profitability.
Now, Richmond, Va.-based Rennie Petroleum, with stores located throughout central and eastern Virginia, is offering to sell its 24 locations along with motor fuels supply agreements to an additional six fuel outlets.[image-nocss]
Two of the company's c-store properties are owned, with the remaining 22 subject to third-party lease agreements. The company operates six of the c-stores, has commissioned dealers in 11 stores and full dealers in seven stores. In addition, the company has supply agreements for an additional six locations, but does not have any property interest in those locations.
Most of the locations sell CITGO-branded motor fuels; two of the stores offer Shell-branded fuels; and one store sells fuels under the Rennie name. This sale is not contingent on a buyer assuming a motor fuels supply agreement from the company, and a buyer does not have to keep the stores as currently branded.
The average lot size for the 24 stores where Rennie Petroleum controls a property interest is approximately one acre with an average building size of more than 1,500 square feet.
Rennie, which started in 1985, filed for bankruptcy in late January 2007. At the time, the company listed assets of $4.67 million and liabilities of $7.98 million. Liabilities include $3.76 million in unsecured, nongovernmental claims. The company listed its largest unsecured creditor as CITGO Petroleum Corp. with a $3.3 million claim. Gross revenue last year exceeded $100 million.
The company sold more than 35 million gallons of motor fuels in 2006, but could not recover from a decline in volume which began in the early part of the decade with Major Oil's sale of gasoline to its own stations at lower prices than it sold to wholesalers like Rennie Petroleum. To stay competitive, Rennie said in the bankruptcy filing, it lost 15 cents a gallon on sales and laid off staff, subleased stores and cut expenses.
Competition from Sheetz, Wawa and Sam's Club further cut into sales and profit margins; Rennie said in January that gross profit from retail gasoline sales was down 60% in 2006 compared to previous years.
An uncompetitive fuel-supply contract and affiliated credit-card fees further burdened the company, and it could not secure financing to update its car wash equipment, leading to a 40% loss of its high-margin Extreme Touchless Wash car wash business.
Attempts by CSP Daily News to reach Rennie Petroleum for comment were unsuccessful at presstime.
The sale of the Rennie's chain presents an opportunity for a strategic or individual buyer seeking to grow in the convenience store and motor fuels distribution industry, said Matrix Capital Markets Group Inc., which is managing the auction. For a strategic buyer seeking to acquire multiple locations, it is also possible that a major oil company would be willing to rebrand the locations in exchange for a long-term supply agreement, Richmond, Va.-based Matrix added.
According to the preliminary sale procedures, which are subject to approval by the court, bids can be submitted on individual stores or supply agreements, a combination of stores or supply agreements or for all of the stores or supply agreements. All bids must be submitted on or before 5 p.m. EDT on Sept. 21, 2007, or such other deadline approved by the court. Bidders submitting qualified bids, as defined in the sale procedures motion and an order of the court approving the sale procedures, will be invited to the auction to be held in Richmond on October 2.
To receive a bid package and for more information on the stores and the bidding and auction process, contact Matrix Capital Markets Group at www.matrixcapitalonline.com or contact Cedric Fortemps at (804) 591-2039.
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