Alco Stores Inc., a 198-store retailer largely serving small towns in 23 states, can finance the reorganisation it began last week in Dallas with an interim loan capped at $50 million and letters of credit from pre-bankruptcy secured lenders led by Wells Fargo Bank NA.
A judge signed an interim order approving the loan and allowing the company to use cash representing collateral for secured lenders’ claims.
Alco filed for Chapter 11 protection 12 October with a commitment from the lenders to provide senior secured financing consisting of a $110-million revolving credit and a term loan of about $12.7 million. In addition to funding the Chapter 11 effort, the loans will be used to repay pre-bankruptcy debt. A hearing to approve the financing package on a final basis is scheduled for 12 November.
Alco has a so-called 'stalking-horse bid' from a joint venture among Tiger Capital Group LLC, SB Capital Group LLC and Great American Group WF LLC to conduct store-closing sales. A hearing to consider approval of procedures to solicit competing liquidation bids and going-concern bids is set for 24 October.
Serving small-town America for 113 years, Alco sells name-brand and private-label products. About 78 per cent of the stores operate in markets without another broad-line retailer.
Alco operates a distribution centre in Abilene, Kansas, and generated net sales of about $474.1 million during the fiscal year ended 2 February, according to court papers. Assets totalled $221.8 million and liabilities aggregated $161.6 million as of 3 August, the company reported.
At the outset of bankruptcy, some $104.2 million was outstanding under the Wells Fargo credit agreement, where CIT Bank is also a lender. About $15.6 million was owed in connection with capital leases as of July. Suppliers, service providers and landlords were owed more than $24 million as of September, according to court papers.
Bloomberg News, edited by ESM
