A number of Christian publishers were represented at the February 17 Family Christian Stores bankruptcy hearing in Grand Rapids, Mich. Attorneys for houses including Hendrikson Publishers, Moody Publishers, Rose Publishing, Crossway, InterVarsity Press, Harvest House Publishers, and Baker Publishing Group were in attendance.

Publishers are among the unsecured creditors owed a total of $40 million by Family Christian Stores, the largest Christian bookstore chain in the U.S., with 266 stores in 36 states. Secured creditors include FC Special Funding, which is owed $24 million, and Credit Suisse, which is owed $34 million.

In an email interview after the hearing, Mark Taylor, president of Tyndale House, which is owed $1.7 million by Family Christian Stores, told PW, “It’s still very early in the bankruptcy process, so we don’t have any details of how Family Christian intends to carry out this restructuring. Obviously we are disappointed that we and all the other trade vendors will take a huge loss in this process. But we hope Family Christian can survive as a chain of stores. No one except the banks and the attorneys will get any money from FCS if we force them to liquidate.”

Fred Evans, senior v-p of sales at B&H Publishing Group, which is owed $516,414, said, “We value Family Christian Stores as a strategic partner in ministry and pray for them as they are going through this process.”

Other top creditors—Harper Collins Christian Publishing, owed $7.5 million; FaithWords, owed $537,374; Barbour Publishing, owed $572,002—declined to comment.

Some publishing houses use a consignment arrangement with Family Christian Stores, meaning the house owns their stock on bookstore shelves. Others sell directly to the stores. Publishers and their representatives, along with Michael V. Maggio, an attorney with the U.S. Department of Justice, are in the process of creating committees to represent both types of creditors and negotiate any debt repayment plan. Publishers are free to contact Maggio regarding the committees.

One point raised during the six-hour hearing before Judge John T. Gregg was the “significant issue of transparency,” according to Credit Suisse bankruptcy attorney Jennifer Hagle. She referred to Richard L. Jackson, an Atlanta businessman who purchased Family Christian Stores in 2012 with two other businessmen and donated it to Family Christian Ministries, a not-for-profit 501c3. The three vowed the new entity would contribute 100% of profits to Christian ministries. Jackson is also behind FC Special Funding, a secured creditor. Hagle said she didn’t learn of Jackson’s interest in the companies until that morning.

According to Maggio, Jackson is owned $24 million in secured debt via FC Special Funding, and he wants to buy the company back once its unsecured debt is shed. “There is nothing set aside for unsecured creditors,” Maggio said.

According to the press release FCS issued last week, a newly formed subsidiary of Family Christian Ministries will be the lead bidder in the bankruptcy sale process. The website iMarketReports.com says that company is FCS Acquisition Holdings. While no clear information is available on the owner, Maggio indicated the owner is Jackson, making Jackson the main secured lender, owner of the store chain, and the possible buyer in the bankruptcy sale. “This all seems very cozy,” said Judge Gregg.

Jackson’s interests were represented at the hearing by Todd Meyers of the firm Kilpatrick Townsend, based in Atlanta. “My client wants to wear the white hat here,” Meyers said. Jackson is also founder and CEO of Jackson Healthcare, a healthcare staffing company based in Atlanta.

Family Christian Stores was represented by A. Todd Almassian. Chuck Bengochea, president and CEO of Family Christian, along with two other officers of the company, attended the hearing.

A number of motions were passed, including those that provide for continuation of employee wages and benefits, customer programs, use of bank accounts, and tax and utility payments. The company is also allowed to continue operations using cash it collects via its day-to-day activity. Additional hearings are set for March and April.