Lawyers whose clients stand to lose $75 million in Family Christian Stores’ Chapter 11 bankruptcy are questioning the motives of a wealthy Atlanta businessman who wants to convert the nation’s largest chain of Christian book and gift stores into a charity.
During a six-hour court session on Tuesday, Feb. 17, lawyers for the chain’s creditors raised questions after discovering Richard L. Jackson is “wearing three hats” in the negotiations to restructure the Grand Rapids-based chain’s debt.
Family Christian Stores, the nation’s largest chain of Christian book and gift stores with 266 stores in 36 states, filed for Chapter 11 bankruptcy last week, saying it needed to restructure its debt load.
Tuesday’s hearing was the first chance for the company’s creditors to respond to the restructuring proposal. Some of the creditors, like Baker Book House of Grand Rapids, sell their goods through the stores on consignment while others are owed money for inventory on the stores’ shelves.
Jackson, who owns the company, acquired $24 million in secured debt and wants to buy the company back after it sheds its unsecured debt, said Michael Maggio, an attorney for the Office of the United States Trustee.
“This man is wearing three hats,” said Maggio, who said Jackson’s full involvement in the company and his role as the proposed new owner was not disclosed until Tuesday’s hearing. “In essence, at the moment, it would appear we’re only moving this case for the benefit of Mr. Jackson.”
Jackson is a member of the investment group that acquired Family Christian Stores in 2012 and pledged to give all of the company’s profits to charity. That pledge has yielded $300,000 so far, according to the company’s petition.
Todd Meyer, a lawyer representing the Jackson affiliate that hopes to buy back the company, said his client has put up “10s and 10s of millions” to keep Family Christian afloat.
“Let’s not put a black hat on my client,” he said, adding that Jackson bought out the JP Morgan loan in full and added another $7 million in collateral. Meyer said Jackson would welcome another buyer for the company.
“My client is wearing a white hat and not a black hat,” he said.
Jackson also is the founder of Jackson Healthcare, which provides doctors and other staff serving more than 5 million patients in more than 1,300 healthcare facilities.
In its Chapter 11 petition, Family Christian Stores asked Gregg for “fast-track” approval of its petition by April 30. That would meet a May deadline to pay off the debt Jackson renegotiated with JP Morgan last summer after the company went through a “liquidity event” in which it was in danger of default.
Family Christian Stores’ annual sales have fallen from $305 million in 2008 to $230 million in 2014, according to its petition. The company, which employs 600 full-time and 2,500 part-time workers, predicted its 2015 sales will fall to $216 million.
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SOURCE: MLive.com – Jim Harger