Great American bids for Jennifer Convertibles GOB sales
Furniture chain will close about 40 stores
Clint Engel -- Furniture Today, July 21, 2010
Jennifer, a Top 100 company that filed for Chapter 11 protection Sunday, asked the court in a motion to approve a closing sale process with the Great American bid as the starting point for possibly higher bids and a potential auction July 26.
In an e-mail earlier this week to Furniture/Today, Jennifer Chairman and CEO Harley Greenfield said the chain will exit the Atlanta, Chicago, Philadelphia and Boston metro markets and the states of Michigan, Florida and North Carolina. Jennifer operates about 32 stores in and around those markets, according to its website.
In one court document, the company also said it plans to close eight other stores in "non-exiting territories."
Under the GAFS agreement, the liquidators would advance the retailer one month's occupancy costs at the 32 closing locations considered exiting territories, or about $331,700. It is also guaranteeing to pay 75% of the cost value of the merchandise at the stores. In addition, Great American would pay a weekly fee for the right to add inventory for the closing sales and would pay a 4% commission on any written sales of that added merchandise.
The sale would begin no later than this coming Monday, July 26, and would run for up to 60 days, according to a document. If GAFS is outbid by a competitor, it would receive a $50,000 breakup fee, according to the agreement pending approval.
In a court document, Jennifer said it determined "the best way to maximize cash available for operations and act in the best interest of their estates and creditors is for the debtors to sell the inventory in closing stores and further reduce its costs and expenses."
The acting U.S. trustee in the case has objected to several of the retailer's first-day motions, including the fast-tracking of the store closings and sale process. That would give the unsecured creditors committee, which has yet to be formed, little time to react and object, according to the trustee.
The trustee also objected to a agreement that, if approved, would give the retailer's main supplier, Haining Mengnu Group, weekly payments of $400,000 and a 95% ownership stake in a reorganized Jennifer by converting its pre-petition debts to equity.
"In contrast, all other unsecured creditors, who collectively are owed approximately $29.6 million, almost twice as much as Mengnu, will not receive any post-petition cash payments," but instead would get a proportionate share of unsecured notes in the reorganized company for the remaining 5% stake, the objection document said.
The trustee also objected to pre-petition wages requested for Greenfield and President and Chief Financial Officer Rami Abada, for $21,670 and $26,689, respectively. The two need to explain why they need the payments, especially since the agreement with Mengnu envisions Greenfield and Abada with guaranteed positions on the new board, and the two may receive additional benefits through a management incentive plan, according to the trustee.