U.S. Bankruptcy Judge John Gregg approved the sale of Family Christian Stores to FC Acquisition for between $52.4 million and $55.7 million on Tuesday, allowing the largest Christian retail chain in the nation to remain open after months of uncertainty.
The hearing, which lasted two hours, took place in Grand Rapids, Mich. Attorney Erich Derlacher, head council for Family Christian, outlined last-minute agreements reached Monday night and Tuesday morning between Family Christian and some of its creditors, which helped paved the way for the sale’s approval.
One of the biggest hurdles was cleared last week when creditors voted to approve the sale.
“We received over 99% approval,” said Family Christian CEO Chuck Bengochea. “We worked hard to establish good relations with our creditors.”
Secured creditors included FC Special Funding, which is owed $24 million, and Credit Suisse, which is owed $34 million. Unsecured creditors, including publishers and other vendors, were owed a total of $40 million. Under terms of the deal worked out earlier, Credit Suisse will receive approximately 17.5 % of what it is owed, and unsecured creditors will receive approximately 14.5%.
“We’re grateful. We have a sovereign God who has a purpose for Family Christian,” said Bengochea. He said that the original estimate of closing 12-14 stores still stands, but that the company is revamping stores to better appeal to customers. They are expanding the gift area and creating unique Bible areas. Several stores are opening soon with the new look, though these are re-openings for stores that have changed locations.
Family Christian Stores will continue to provide publishers—30% of its sales are books—with an outlet for their wares. “We have to delight consumers for the publishers, and we can when we create a great environment,” Bengochea said. “The best thing we can do for our vendors is exist for the next 10 years and give them a place to sell their products.”
Publishers See 'Embarrassing Struggle'
Publishers were glad Family Christian will remain in business, but the chain's survival did come at a cost. Dwight Baker, president of Baker Publishing Group, said they will continue working with FCS, but referred to the chain's recent legal woes as "embarrassing."
"Baker Publishing Group is prepared to restore our relationship with FCS and to explore how we can together serve readers of Christian books. That outcome is our only justification for this embarrassing struggle," he said.
Jerry Kregel, executive vp of publishing and CFO of Kregel Publications based in Grand Rapids, said that most suppliers, including Kregel Publications with losses valued at $400,000, will take a significant financial hit. Nevertheless, a majority of suppliers supported FCS staying in business.
“They represent a significant means to put our product in front of consumers to see and purchase it,” he said, speaking of Kregel only. “So, while what we will actually receive out of the bankruptcy settlement is relatively small and frankly stinks, at least them continuing as a going concern provides as opportunity for ongoing sales to and through them.”
Kregel expects to continue its relationship with FCS. “While we will understandably manage our credit risk with them a little tighter, we certainly want to see them succeed and will continue to partner with them,” he said.
Richard L. Jackson purchased Family Christian Stores in 2012; he is also behind FC Special Funding, a secured creditor; FC Acquisition, which is buying the company; and FC Special Funding, LLC, which provided funding to FC Acquisition. Bengochea will remain as CEO of Family Christian Stores.