Bankruptcy judge urges action
Judge Karen B. Owens, who is presiding over the True Value Chapter 11 case, on Wednesday sent a strong message to debtors and lenders: get busy.
That message, in so many words, came at the end of an emergency discovery conference with lawyers from True Value, PNC and Do it Best, the stalking horse bidder of True Value.
The judge said it appears the parties should be doing more to negotiate a settlement on their own accord.
“However, it does not appear that that is happening, and you brought this opportunity for me now to give you my thoughts ahead of time to avoid a very costly dispute that if it does go forward, as I suspect it will on Monday and Tuesday, will not end positively for the estate.”
The judge added: “I would strongly encourage you to increase your settlement discussions in earnest,” she said.
The main business of the conference was to hear arguments about the validity of a subpoena issued by PNC to Do it Best for documents related to the sale. The judge ordered the subpoena quashed.
Do it Best successfully argued that the PNC’s request for both a deposition and production of documents was neither relevant nor necessary. Do it Best’s counsel described the request as a “fishing expedition. It looks like it's designed to gain some tactical advantage.”
Information related to the sale is either included in the assets purchase agreement, or should come directly from the debtor, True Value, as opposed to the stalking horse bidder, the counsel argued.
The Monday hearing will consider True Value’s ability to use cash collateral and the protection of prepetition lenders, such as PNC.
The 16-minute Zoom call took place Wednesday as a larger disagreement is playing out. On the one hand, Do it Best and True Value are the architects and strong advocates of a sale of the assets to Do it Best, while PNC—a True Value lender— has argued strenuously for a liquidation.
The question of sale vs. liquidation has wide-ranging implications for the entire hardware industry. And multiple retailers who spoke to HBSDealer have expressed concerns over the serious disruptions that a liquidation could cause for the entire hardware retailing industry.
In earlier court documents, Megan Mentzer, the fourth-generation owner and operator of Newton’s True Value Hardware in Cherryvale, Kansas, made the case that a sale is far preferable to a liquidation.
“The company is not just an investment for us owners; it’s our livelihood,” she wrote. “This is not just what we do for work; it defines who we are, day in and day out. We will do whatever it takes for this business and our stores to survive these liquidity challenges because we believe in and care deeply about the business and the people it serves.”
