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Tuesday, 07 July 2015 12:10

Family Christian seeks approval to hold creditor vote on proposed sale to inside buyer

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Executives at Family Christian Stores want a federal bankruptcy court to allow the company to hold a vote of creditors to decide the fate of its proposed sale to an inside buyer.

According to a joint plan of liquidation filed late last week with the U.S. Bankruptcy Court for the Western District of Michigan, Grand Rapids-based Family Christian LLC’s plan to sell all of its assets to FCS Acquisition LLC must be approved by at least one out of four different classes of creditors to move forward.

The voting classes of “impaired” creditors include the senior lender, term lender, consignment vendors and holders of other unsecured claims.

The court must rule on whether to proceed with the vote, a ruling that could come at a July 10 hearing.

According to two sources with knowledge of the Chapter 11 bankruptcy process, it is unlikely that the deal will fall through at this point.

One source with knowledge of the proceeding who asked not to be named said that the sale could close by the end of July with new ownership in place as soon as early August.

According to the asset purchase agreement, FCS Acquisition would buy all assets for between $52.4 million and $55.7 million.

The bankruptcy process for Family Christian, a retailer of religious books and gifts with 266 stores in 36 states, has been nothing short of contentious. As MiBiz reported on June 19, Judge John Gregg denied a sale motion of all Family Christian LLC’s assets because the proposed sale to an insider, FCS Acquisition LLC, did not meet the heightened scrutiny the court requires when insiders are involved in a sale.

The proposed buyer was believed to be an entity controlled by Atlanta businessman Richard Jackson, who was also the company’s chairman, senior lender and one-time stalking horse bidder. Jackson was one of three executives who purchased Family Christian in 2012 from a private equity firm and donated it to a nonprofit called Family Christian Ministries.

Under the proposed plan, Jackson would acquire the company and leave the organization’s senior leadership in place. CEO Chuck Bengochea testified last month that all but approximately 15 of the chain’s stores would remain open.

The source with knowledge of the case said the plan appears to have widespread support. In particular, creditors favor the proposed plan because it leaves open the stores as a vehicle for vendors to sell their products.

By comparison, the second highest bidder in a late-May auction had planned to close all the stores and liquidate the company’s assets.

The sale to Jackson, however, was halted in part because of a phone call Bengochea made to Jackson on the second night of the auction telling him he needed to up his bid.

“Any requests for higher bids should have been placed on the record at the auction or communicated through legal counsel,” Gregg wrote, in a June opinion. “Moreover, the request should have been made to all qualified bidders, not simply to an insider that has assured the Debtors’ CEO of future employment.”

The second-place bidders in the auction — a joint venture of Boston-based Gordon Brothers Retail Partners LLC and Northbrook, Ill.-based Hilco Merchant Resources LLC — are no longer part of the process, sources told MiBiz.

Read 1554 times Last modified on Tuesday, 21 July 2015 10:10

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