In a fight for its financial life, the nation’s largest Christian bookstore chain is trying a new strategy.
After a failed attempt last month to sell itself to to FCS Acquisition, a subsidiary of the chain’s parent company, Family Christian Stores asked a bankruptcy judge to let its creditors decide whether the same sale should go through.
The previous sale was rejected by judge John T. Gregg, who called FCS Acquisition an “indisputable insider” and the process “prolonged, controversial, and contested.”
While Family Christian “diligently pursued consensual resolutions” and showed itself to be “transparent and extremely forthcoming with information,” the auction itself “suffered from mistakes” and Family Christian “failed to articulate a sound business justification for the sale to any of the bidders,” Gregg said.
Today, Gregg said yes to a new plan that could bring the troubled retailer’s bankruptcy saga to a close.
Family Christian’s creditors, many of them Christian publishers and vendors, will have until August 7 to approve or deny the sale to the FCS Acquisition, which has promised to keep the stores open.
Even though the creditors and vendors would lose millions, they overwhelmingly approved of the sale last time around, since keeping the stores open means a continued outlet for their products.
The sale must be approved by more than half of the voters holding two-thirds of the debt in each class of creditors, according to the proposal. There are eight classes of creditors, and votes will be weighted by the type and amount of debt held.
The sale needs to be approved by mid-August so Family Christian has time to prepare its Christmas catalogs and order holiday stock, an attorney for the company said, according to MLive. Many of the company’s vendors are asking for cash or refusing to deal with them until they’ve emerged from bankruptcy, he said.
Family Christian filed for bankruptcy in February after it “carefully and prayerfully considered every option,” but pledged to avoid layoffs or store closures.
Despite 266 stores in 36 states bringing in $230 million in gross revenues in 2014, Family Christian owed more than $90 million. Sales of $305 million in 2008 had steadily shrunk to a projected $216 million this year.
Three years ago, Family Christian bought itself back from private equity owners, and in 2013 promised to donate all profits to serving widows and orphans around the world.
CT has closely followed the case, including the initial bankruptcy filing, a lawsuit filed by 27 Christian publishers, Family Christian’s bid withdrawal, and the court’s rejection of the “flawed” auction. CT also dug into the biblical debate over bankruptcy and whether Family Christian was right to turn to the law for grace.