A federal bankruptcy judge today freed Bison Building Materials from 11 property leases that it said had contributed to the financial problems that forced it to seek Chapter 11 bankruptcy protection.
Three of the leases are in Houston and two are in the Denver suburb of Aurora, Colo., while the others are in San Antonio; Conroe, Texas; Irving, Texas; Albuquerque, N.M.; Las Vegas, Nev.; and Monroe, Ohio. The Conroe lease, added after the others, appears to be the only one in which Bison will lose any extra money. In that case, the landlord was allowed to keep Bison's $8,000 deposit.
Aside from rejecting the leases, Houston-based Judge Wesley W. Steen of the U.S. Bankruptcy Court for the Southern District of Texas also approved some routine motions that will help Bison keep operating while it reorganizes under the Chapter 11 umbrella. He has yet to schedule a final hearing. The next likely major action appears to be a meeting of creditors set for Sept. 8.
Bison---America's 14th-biggest LBM operation, according to the 2009 ProSales 100--filed for Chapter 11 protection on June 28. It recorded a loss of $16.1 million in $214 million in revenue during the fiscal year ended last April 30., and it forecasts it will accumulate a negative net cash flow through Halloween reaching $2.2 million as it seeks to reorganize and emerge from Chapter 11.
In court filings, Bison said its problems came after it began to expand along the Interstate 35 corridor in 2005 and then into Nevada, Arizona, Colorado, Ohio and New Mexico. "However, when the housing downturn occurred, the Debtors instituted a downsizing program and retrenched to its core Texas business" in metro Houston, one motion states. But even after it left the other markets, it still had to make lease payments on the locations that it closed.
Bison noted in a July 29 motion that in some cases it had obtained subleases for some of the properties and it is "continuing to negotiate with the various landlords regarding the transition of the leases to new tenants, as well as other means of mitigating rejection damage claims against the Debtors' estates." However, a declaration filed to the same court in late June by Bison president Pat Bierschwale said that, "Since most of the Debtors discontinued operations are in markets such as Las Vegas and Phoenix, some of the most toxic real estate markets in the United States, the Debtors' effort to sublease premises or otherwise mitigate damages of landlords have been largely unsuccessful,. The Debtors are now being sued in multiple locations throughout the United States by former landlords."
In May, the statement added later, "management decided it was not possible to continue to pay the lease rentals attributable to the discontinued operations and ceased making those payments." The Las Vegas lease isn't scheduled to expire until 2020, while one of the leases in Aurora runs to 2015.