The assets of six Gordy’s Market Inc. grocery stores will be auctioned off March 6, with the sales finalized two days later, according to the attorney overseeing a plan to dissolve the grocery chain.
Milwaukee attorney Michael Polsky, who was appointed in January as receiver after food distributor Nash Finch filed a lawsuit against GMI, filed paperwork in Chippewa County Court, laying out how the assets of the stores will be handled.
Polsky “filed a motion to sell substantially all of the assets of Gordy’s Market Inc., free and clear of all liens,” a court document reads. “The receiver will accept qualified bids from qualified bidders for certain GMI assets.”
Gordy’s Market Inc. president Jeff Schafer was reached but he declined to comment Monday.
The assets referred to in the filing are for six Gordy’s Market Inc. locations: Chippewa Falls downtown, Chippewa Falls on Lake Wissota, Cornell, Ladysmith, Chetek and Barron. The Eau Claire store on Clairemont Avenue, which closed and later re-opened, is not included in this lawsuit, as Gordy’s Market does not obtain its groceries for that store from Nash Finch.
The auction will be held at 10 a.m. March 6 at the law offices of Godrey & Kahn in Milwaukee. On March 8, Polsky will present the sale offers to Chippewa County Judge James Isaacson for approval.
To become a qualified bidder at the auction, a company must include an “earnest money deposit of $100,000,” which Polsky will place in an escrow in a non-interest bearing account. Qualified bidders must submit their deposit by March 1 to be eligible to participate in the auction. Companies wishing to bid on the six stores should have an appointed agent attend the auction. Bids for portions of a lot will not be considered.
The auction will be done in rounds, with each company having 15 minutes to submit a bid, the court document states.
Polsky is working with Illinois-based Silverman Consulting “for the purpose of overseeing the operations of GMI and assisting the receiver in marketing and negotiating the sale of GMI’s assets,” the court document reads. “The receiver and Silverman have contacted potential purchasers in order to market the assets of GMI in a commercially reasonable manner and maximize the value of the assets for the benefit of GMI’s creditors.”
Polsky has set a deadline of April 24 for any creditors of GMI to enter claims with the court if they see to participate in any dividends. Another new filing is a 49-page document with a list of multiple interested parties, including companies who are making a claim against Gordy’s Market. APG of Wisconsin, the parent company of the Eau Claire Leader-Telegram, is among the companies listed on the document.
In a filing last month, Gordy’s Market requested the lawsuit be dismissed and a jury trial be held.
In the Nash Finch lawsuit, the food distributor claims that GMI owes a total of $46.2 million — $43.2 million in a rebate-able incentive, a $1 million note, and $1.9 million in accounts receivable.
William Jacobs, Nash Finch vice-president of treasury and corporate development, submitted an affidavit along with the lawsuit when it was filed in December, writing that GMI is in default under the terms of the “customer supply agreement” from November 2017.
“GMI is unable to pay plaintiff timely since late August 2018,” Jacobs wrote. “GMI’s delinquent balance with plaintiff has grown considerably in the last few weeks.”
A review of Gordy’s Market Inc.’s finances indicates the company “has no excess cash to get caught up on its delinquent balance,” Jacobs wrote.
The lawsuit states that Gordy’s Market Inc. promised to pay the principal sum of $1 million, together with interesting on the principal balance. As collateral, GMI included “equipment, fixtures, inventory, investment property” and included liquor, wine and beer licenses, the lawsuit states. Gordy’s Market assumed leases of six stores from Nash Finch, with collateral assigned to each of the six locations.
“As a result of these defaults, (Nash Finch) accelerated the maturity of the note so that all amounts there under were immediately due and payable as of Dec. 27, 2018,” the lawsuit states.
In August 2017, Nash Finch filed an $86 million lawsuit against the grocery chain. By Dec. 7, 2017, 1,400 separate creditors filed proof of claims totaling an additional $50,753,000, and Settlers Bank filed a claim of $5 million.
By the end of the year, 20 of the 26 Gordy’s Market locations had either been sold or closed, with the Eau Claire location later re-opening.
Jeff Schafer, who returned to the company in March 2017 after a half-year sabbatical, is now leading the new, smaller team. The Schafers acquired the six stores in December 2017 through an auction and working out an agreement with SpartanNash, the new corporate name of Nash Finch.
SpartanNash was the highest bidder, buying the six stores at the auction for $19.8 million. The food distributor then agreed to assign its interest in the purchase to Gordy’s Market Inc. This agreement allows the Schafers to retain ownership of the six stores and keep 340 employees on the payroll.
Some of the other 20 stores, like in Stanley, were never sold. Others, like Chippewa Falls south and Rice Lake, remain shuttered and aren’t reopening as grocery stores.
The assets referred to in the filing are for six Gordy’s Market Inc. locations: Chippewa Falls downtown, Chippewa Falls on Lake Wissota, Cornell, Ladysmith, Chetek and Barron.