by Former Big Lots becoming an ICE detention center?
DALLAS — Although the bankruptcy court here has approved the sale of what’s left of Buddy Mac Holdings to Phonix RBS and, in a separate deal, to S.K.C. Enterprises, d.b.a. Rent One, there are a few hurdles the deal must clear.
Phonix RBS, a subsidiary of AF Newco, is Buddy Mac’s secured pre-petition lender, its debtor-in-possession financier, largest creditor, and, with the WholeCo deal approved by the court, the credit bid buyer. Judge Michelle V. Larson’s signed order also approves the separate $1.1 million cash sale of eight stores to Rent One.
By providing DIP financing, Phonix obtained an aggressive “roll-up” provision that converts three dollars of pre-petition debt into DIP obligations for every one dollar of new DIP money funded. The result of that roll-up is that Phonix holds a towering, first-priority secured claim against basically everything Buddy Mac owns and even assets Buddy Mac doesn’t own but that are held by Buddy Mac principal owner Ian MacDonald.
Phonix is also acquiring customer rental contracts, inventory, leases, equipment, intellectual property and related assets across dozens of locations. Ten store leases with known cure costs totaling roughly $65,000 are being formally assumed and assigned to Phonix, with stores in New Mexico, Oklahoma, Arkansas and Missouri among them. One additional lease, for a Walnut Ridge, Arkansas, store, is contingent on whether the separate Rent One deal closes on that location.
There is, however, another hurdle for at least a subset of properties. Four locations, including those in Plainview, Texas; Seminole, Oklahoma; Gallup, New Mexico; and Brownfield, Texas, are owned as tenancy-in-common properties, meaning Buddy Mac holds only a fractional interest alongside other co-owners who are not debtors in the bankruptcy. Selling those properties free and clear over the objection of the co-owners requires a separate legal finding under the Bankruptcy Code, which allows a bankruptcy court to sell a co-owner’s interest only under certain conditions.
The court carved out those four TIC properties from the Phonix deal. A hearing on the TIC properties, against which Phonix has liens, was held Thursday.
But these would seem to be minor speed bumps. With both sale orders now entered, the bankruptcy pivots from a going-concern operation to a wind-down. Phonix gets a RTO business spanning multiple states to add to its portfolio of about 100 American Freight stores, while the bankruptcy estate retains cash, avoidance claims and whatever proceeds flow from the settlement and TIC property proceedings.
In the other deal, for $1.1 million, Rent One gets eight stores and the accompanying customer rental agreements. Unlike the Phonix deal, the Rent One sale is clear of all liens, claims and encumbrances.
Early last month, the debtors sold off nine Buddy Mac stores in Missouri to National TV Sales & Rentals for $700,000.
Big Lots revival
Turning our attention to the aftermath of the Big Lots bankruptcy, many of its stores and distribution centers are being re-purposed in interesting ways. For example, the federal government is proposing to turn a former Big Lots warehouse in Schuylkill County, Pennsylvania, into an ICE detention center for an estimated 7,500 people.
If you take the total state population of approximately 13 million people, divide by the total number of municipalities (2,555), the average is roughly 5,100 people per municipality. This makes that one ICE detention center almost 50% larger than the average Pennsylvania town.
Not surprisingly, local officials are concerned about the infrastructure needed for a facility of this size. The county’s water system can only service 6,000 gallons per day now, for example. And on Thursday, Pennsylvania Gov. Josh Shapiro said he opposes the plan, which also calls for another “massive” ICE detention center in Berks County, Pennsylvania. Shapiro vowed to use Pennsylvania’s legal and regulatory authority to kill the proposal, according to local news outlets.
On a more positive note, the new owners of Big Lots!, Variety Wholesalers has added furniture from Ashley, specifically its Signature Design line. Consistent with furniture offerings at Big Lots before its bankruptcy in September 2024, the Ashley assortment covers sofas and sectionals, dining sets, mattresses and bedroom furniture.
Signature Design is already available at all 223 Big Lots! stores, according to the company. The chain re-opened in October last year after acquiring the stores out of liquidation in January. Variety Wholesalers is the parent company also of Roses and Maxway.
AF Newco v. Franchise Group
Finally, a check on the kerfuffle between Fusion, the newco created out of the ashes of Franchise Group, and AF Newco show no movement since Dec. 18, 2025, when AF Newco filed its counter-claim. The dispute centers on a “Transition Services Agreement” in place when AF Newco acquired 31 American Freight stores out of bankruptcy. When the TSA expired, the parties never properly amended the agreement in writing, according to AF Newco, while FRG insists that company representatives for both reached an enforceable oral agreement to extend services. Both sides make additional accusations, including an AF Newco claim of $672,000 in missing inventory.
But, the litigation is seemingly frozen in amber, a fossilizing remnant from the extinction of FRG in November 2024, when FRG filed for Chapter 11. AF Newco acquired the American Freight stores and IP for about $1.1 million in January last year, then set up Phonix RBS a month later for “acquisitions,” according to testimony from the Buddy Mac proceedings.
What does the inaction mean? It could mean that the claims and counter claims have produced a stalemate. It could also mean that counsel for each side is attempting to end this out of court. Certainly, Phonix RBS has been busy litigating in Dallas in the Buddy Mac bankruptcy.
It is worth noting that after all of these bankruptcies, after years of grinding through the courts, the roster of principals at the larger pieces of what was the $2.8 billion FRG empire as it related to furniture has so many people connected to FRG. Brent Turner and Michael Piper, principals at AF Newco and Phonix RBS, were together at Liberty Tax, the company that became FRG. Michael Bennett remains at the helm of the what’s left of Buddy’s Home Furnishings, which was acquired by private investment firm Skyline Investors in January. He’s been president there since 2019.
Even Brian Kahn, CEO of FRG when it bankrupted, is still around, managing Phonix for Turner and Piper, according to the same testimony in the Buddy Mac proceedings, and consulting for AF Newco, according to the claim filed by FRG against AF Newco. After denying involvement in or knowledge of a $294 million fraud scheme at Prophecy Asset Management, the subject of separate investigations by the SEC and DOJ, Kahn pleaded guilty on Dec. 10, 2025, to conspiracy to commit securities fraud relating to that Prophecy scheme.
