(Bloomberg) – bankruptcy seller Big Lots Inc. There is not enough money to pay for the supplier for all the goods provided during the unsuccessful effort of the seller to close hundreds of stores, to people who are familiar with the situation.
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The disadvantage means that suppliers who have delivered tens of millions of dollars of furniture and other items were among the main losers in the case of the chain.
The Great Lota has received a court authorization this week to determine how much more than 1,000 suppliers will pay, whose demands range from several thousand dollars to a few worth more than $ 1 million, according to court documents.
The company did not say how much it can owe suppliers. But Big Lots made it clear that there was not enough money to repay all the administrative claims – costs created during the bankruptcy case – they said that people who demanded not to be identified.
Obligations after bankruptcy are usually paid completely because federal rules require that any suppliers, employees and restructuring of lawyers involved in the company after submitting bankruptcy receive a higher repayment priority. This will distract them from leaving the reorganization company.
Sellers previously claimed that Big Lots had ordered the goods after submitting the application at September 11, despite realizing that they probably wouldn’t have enough money to cover their expenses. Creditors’ lawyers claimed that during the controversial New Year’s court in court, large parties had received about $ 250 million in costs, while in bankruptcy that they would not be able to return.
Renters, suppliers who provided inventory of large lots and other creditors, said during a separate hearing in December that they were concerned about the fact that the company would decide who would get a salary with a limited remaining money.
Suppliers of the wrong manager of BIG LOTS and the role played by investment advisor Gordon Brothers Group because they are not potentially paid for products shipped to the chain after bankruptcy.
The Gordon brothers’ units acted as a lender, a trade liquidator and a buyer of the last resort in the Big Lots’ case ‘. Three months after the sales salesman report, the company’s purchase agreement fell apart, and large plots were expected to close. Shortly thereafter, Gordon Brothers won the approval of the Court of A transaction under which several hundred stores are expected to remain open.
Some of the duties that are Gordon’s brothers in the Big Lots case are in conflict with others, according to suppliers, as well as experts who are not involved in it.
For example: how the liquidator Gordon Brothers have retailer has an incentive to convince suppliers to deliver as much as possible on credit to pack the shelves. But if the revenues did not cover the bills to suppliers, the borrowing of the Gordon brothers brothers could avoid further risk by turning off the funding on the large lot.
At least one supplier states in court documents, that happened.
“That’s really dangerous,” said veteran lawyer Ken Rosen, who did not get involved in the Big Lots case, said the various roles of Gordon brothers in that issue. “It’s just too close to comfort.”
Big Lotsa representatives refused to comment.
“Code and bankruptcy rules provide rigorous protective stripes to prevent conflicts that can be harmful to the estates and its creditors,” said Bloomberg News brothers Gordon Brothers. “In such cases, a party like the Gordon brothers who are able to provide multiple solutions, and at the same time avoiding conflict can benefit from debtors-preserving and interested parties, including creditors.”
The case of ‘very unusual’
The situation of Big Lots is “very unusual”, because companies are usually safe before the larger reports Chapter 11 to have enough money to work while reorganizing, said bankruptcy lawyer Lorenzo Marinuzzi, who is also not involved in the case.
Creditors’ lawyers compared the troubles of BIG Lotsa -aSa bankruptcy to the “R” toys of US Inc., in which 33,000 workers had to compete with lawyers and other administrative applicants to get a salary. In this case, as well as fellow dealer Sears Holdings Corp, Chapter 11, such creditors had to accept less than they owed them, Rosen said.
In his opinion, suppliers in the early days of great bankruptcy should require direct payment or accept a short delay of only about 10 days.
After the private capital company Nexus Capital Management in September reached a contract for the purchase of large parcels, the chain continued to order an inventory from the suppliers with the conviction that the financing of Gordon brothers would assist in payment of goods, lawyer Richard E. Schrier claimed in court documents and during the hearing in February 26.
The acquisition agreement fell apart because the estimate of the BIG LOTS inventory assessment was lower than expected, Bloomberg reported earlier.
The case is Big Lots Inc., No. 24-11967, at the US Bankruptcy Court for Delaware County.
