by Rent One on track to acquire 8 stores, active RTO customer agreements
DALLAS — I’ve learned a lot covering the bankruptcies of Franchise Group, American Signature/Value City and Buddy Mac Holdings. I’ve learned that U.S. bankruptcy trustees raise significant questions, often in an attempt to protect consumers, but that they are largely ignored anyway. I’ve learned how clubby the bankruptcy litigation business has become. And I’ve learned that if you are going to make predictions about how a proceeding is going to go, make them often, because surprises lurk around every corner.
The BMH bankruptcy in Dallas provided fresh evidence of that last lesson on Monday. S.K.C. Enterprises, or Rent One as the Illinois-based company is known at retail, emerged at the proverbial last minute to make a bid for eight stores, three of them with transferable leases. (This is another thing I’ve learned: Bankruptcy proceedings often grind slowest with regards to landlords, leases and cure claims for those leases.) Also part of the deal are Buddy Mac’s active RTO customer contracts for the eight locations.
The three stores with property leases included are in Shawnee and Tahlequah, Oklahoma, and Malvern, Arkansas. S.K.C. Enterprises has agreed to pay $1.1 million in cash, plus assumed liabilities, with the cure costs for lease defaults being deducted from that amount and paid directly to the various landlords.
The leading bidder for the rest of BMH assets and BMH’s primary secured creditor, Phonix RBS, BMH’s principal creditor, has agreed to the S.K.C. deal, amending its own bid and agreement-to-purchase accordingly. Phonix’s bid is $5.5 million, plus credits, and to secure this bid, Phonix has put more than $500,000 in escrow.
About a month ago, BMH agreed to sell off nine stores in Missouri to National TV Sales & Rentals for $700,000, or an average of $78,000 per store, reducing BMH’s retail network to 37 locations. That deal, too, was allowed by Phonix. The S.K.C. Enterprises deal whittles down the BMH network further, to 29 stores.
The auction planned for BMH was cancelled after Phonix and S.K.C. Enterprises divided the assets rather than compete for the same stores, a deal contingent on Phonix’s OK. The eight stores S.K.C. gets are scattered across Oklahoma, Arkansas and Illinois, where they likely will convert to Rent One. Combined, these stores generate a monthly rental income of about $194,000, according to a pricing schedule attached to the amended agreement filed with the court on Monday.
Rather than a flat price, S.K.C.’s acquisition is structured around each store’s “Ideal Monthly Rental,” or the total projected income from active RTO contracts, multiplied by a negotiated factor ranging from 4.75 to 7, depending on the store. The store in Walnut Ridge, Arkansas, alone accounts for nearly $313,000 of the total purchase price, reflecting both its high rental income and its 7x multiplier, according to the exhibits accompanying the motion to sell.
There are a few objections to the selloff. They were filed with the court on Wednesday, and they predictably come mostly from landlords and counties that claim they are owed sales taxes. As of our deadline Thursday, the court had not yet approved the BMH selloffs, but amended or red-line agreements filed early afternoon suggest that the sales are moving forward. They await Judge Michelle Larson’s approval and signature.
According to its website, S.K.C./Rent One was founded in 1985 and has more than 100 stores in eight states. Buddy Mac Holdings filed bankruptcy on Dec. 4.
The full docket for BMH’s bankruptcy proceedings can be found here.
