A second financial institution filed objections yesterday to a bid by Stock Building Supply to pay $15 million to buy National Home Centers, the Arkansas-based dealer that ranked 26th on last year's ProSales 100 and now is in Chapter 11 bankruptcy.
Liberty Bank of Arkansas noted in a federal bankruptcy court filing that National owes it and three other financial institutions roughly $15.5 million. "Based upon the amount of debt owed .. it appears that the purchase price of $15 million may be insufficient to satisfy the total indebtedness owed to all of such secured creditors," Liberty Bank said. "Moreover, if there is a downward adjustment in the purchase price, it appears even more unlikely that the claims of all of such secured creditors will be paid in full from the sale proceeds."
Liberty Bank requested that National should be required to amend its motion selling itself to Stock so that it provides payment in full to Liberty. Last week, another lender, Bank of America Leasing & Capital, filed a similar motion making a similar request.
U.S. Bankruptcy Court Judge Ben Barry plans to conduct a hearing in Fayetteville, Ark., on April 2 to consider National Home Center's sale. Earlier this month--before the objections arrived--the court accepted Stock's $15 million offer as an opening bid. Stock seeks to acquire National as a "stalking horse" bidder for National's assets under Section 363 of Chapter 11. That section of the bankruptcy laws allows for the sale of assets free of liens and other claims.
Springdale, Ark.-based National--the No. 26 dealer on last year's ProSales 100, with $144.7 million in revenue in 2008--filed last Dec. 9 for protection from creditors under Chapter 11 of the bankruptcy code. It had been planning to sell three branches (and its website home page was advertising racking for sale) when Stock entered into its agreement with National late last month.
Earlier this month, National reported its net loss for January increased nine-fold to $4.3 million. That occurred even though sales rose to $7.2 million in January from $6.9 million the month before. The cost of materials was one reason why; it jumped to $6.3 million from December's $4.9 million, shrinking January's gross profit to $837,314 vs. December's $2 million. In addition, operating expenses more than doubled to $4.3 million in January from $2 million in December. Of that, $1.4 million represents a reserve set up for the uncollectable portion of a life insurance premium, and $867,361 was booked to write off leaseholds at closing facilities.
Stock, the second-biggest LBM dealer in last year's ProSales 100, spent part of 2009 in Chapter 11, emerging last July 1 as a much smaller company focused on 19 markets and annual revenue of about $1 billion. Stock has stressed in several recent announcement that it and its 51% owner, The Gores Group LLC, were looking to grow the company.