A U.S. bankruptcy judge on Thursday approved store-closing sales for the remaining Dawahare's locations, as the company prepares to shutter operations within the next few months.
Liquidator Gordon Brothers Retail Partners can begin the sales, which will continue through the end of August at all locations and might extend into September at select ones.
In a five-hour auction to determine the liquidator, Gordon Brothers agreed to pay 41.5 percent of the retail value of Dawahare's merchandise. Court filings said the percentage payment was based on the inventory being no less than $8.6 million.
Gordon Brothers also has committed to pay a fixed $15,000 for the sale of fixtures, furniture and equipment at each of no fewer than 17 Dawahare's stores and as many as 22.
The Lexington company had 29 stores spread across Kentucky and one in West Virginia when it entered bankruptcy protection May 30, but seven were closed or began going-out-of-business sales immediately in an effort to save the company. Dawahare's and its advisers soon realized that there was “no reasonable feasibility” of saving the company without a major injection of money from creditors or shareholders, Dawahare's bankruptcy attorney, W. Thomas Bunch, has said. New financing could not be arranged.
Leases at the 22 remaining stores will end in August, although Gordon Brothers might renegotiate leases if store-closing sales need to extend into September, Bunch told the court Thursday.
The 101-year-old family-owned company had $10 million in assets and $9.3 million in debt at the time of the initial filing. More than $5 million of the debt was owed to Fifth Third Bank, the largest secured creditor.
“We're very optimistic that this will pay the bank in full,” Bunch said after the hearing.
He said it's too early to be certain, though: “It's kind of impossible to say what the net dollars will be until it's done.”
Under an agreement reached recently, Fifth Third will put $300,000 into an escrow account for the unsecured creditors, Bunch has said. About two-thirds of that money would be recovered from the sale of leases, cars and life insurance policies owned by Dawahare's.
The remaining $100,000 would come from Hoover's Furniture LLC, a separate business started years ago by the Dawahare family with the financial backing of Dawahare's Inc., the parent company of Dawahare's of Lexington.