The bankrupt Family Christian Stores (FCS) has auctioned its assets to the highest bidder, which is owned by the same company that owns FCS and promises to keep its stores open. In court documents filed Wednesday, the company disclosed that FC Acquisitions agreed to pay about $42 million for the failing bookstore chain.
FCS came into Chapter 11 bankruptcy with more than $100 million in debt. If approved by a bankruptcy judge, the auction bid would allow the country’s largest Christian bookseller to stay open rather than liquidate its inventory.
But the bid by FC Acquisitions doesn’t mean it brings $42 million in cash to the table. FC Acquisitions proposes to assume about $46 million of the chain’s outstanding debts and pay them off in the future, not at the time of the sale.
The bid provides for FCS to hang onto about $23 million in debt owed to FC Special Funding, which is backed by Richard Jackson, the president of the board of the umbrella company that owns both FCS and FC Acquisitions. FCS also owes about $34 million to Credit Suisse, but it’s not clear how much of that bill it plans to pay. Court documents state Credit Suisse could receive the “cash component” of the offer, but that amount looks to be only about $4.9 million.
The company had other offers on the table, including one from two liquidation companies and one from FC Special Funding, the Jackson-backed senior secured creditor. A bankruptcy judge must still approve the sale.
FCS filed for bankruptcy in February, just two years after a group of private investors bought the company and converted it to a non-profit.
At the time of the sale, the investors announced all FCS profits would be donated to the non-profit, which would use the money to serve widows and orphans in the United States and abroad. According to court filings, only $300,000 has been contributed from the stores to the non-profit since then.
When it initially filed for bankruptcy, FCS came to the table with a “stalking horse” bid from FC Acquisitions. FCS asked the court to approve a quick sale, but then it withdrew the offer under criticism from creditors that the relationship between FC Acquisitions and FCS was too cozy.
FCS agreed to hold an auction for its assets instead, but the results of the auction don’t differ much from the original plan. The bid from FC Acquisitions does give greater detail about which debts it plans to pay and how, and it offers a settlement over some disputed inventory. Christian publishers that had inventory on consignment with FCS will get at least a portion of the amount the company would have paid for the items under normal circumstances. According to a lawyer representing FCS, the publishers agreed to the arrangement.
Meanwhile, the business is still struggling to make money. Since it filed for bankruptcy, FCS has lost nearly $6 million in operating revenue while its creditors await a decision.
— by Lynde Langdon