Gas-Mart USA Inc., owner and operator of convenience stores located at Phillips 66/Conoco gas stations, has filed a Chapter 11 voluntary bankruptcy petition, listing unsecured debts of nearly $14 million.
The petition was filed in affiliated cases in U.S. Bankruptcy Court in the Western District of Missouri for Gas-Mart, as well as for Aving-Rice LLC, a company based in Illinois, for Fran Transport & Oil Co. of Missouri, and for G&G Enterprises LLC of Missouri.
The bankruptcy petition says the companies operate “as an integrated enterprise with approximately 49 gas stations in five states, and a related ATM and fuel-hauling business.”
Gas-Mart co-owner David George said the company now has 42 stores in Illinois, Iowa, Indiana, Nebraska and Wisconsin. Earlier this year, it sold 19 stores in Missouri and Kansas to Travel Centers of America. It recently lost its lease to operate the two Kansas Turnpike convenience stores which now are operated by EZ Go.
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The bankruptcy filing, in which the company seeks protection from creditors while it intends to reorganize, was signed by David George and Michael George, who have shared interests in Gas-Mart, Aving-Rice, Fran Transport & Oil and G&G Enterprises.
The petition, also signed by John Tittle Jr., CEO of Aving-Rice, expresses intent to pursue a debtor in possession loan with UMB Bank or similar financing.
The largest single unsecured creditor listed in the filings is GSA Trust of Littleton, Co., owed $3.8 million. The second-largest unsecured debt is to Phillips 66 Fuel for $2.7 million. The next-largest debts are to Citgo for $1 million and to Farner Bocken Co. of Carroll, Iowa, for $990,000.
The petition certifies assets of between $10 million and $50 million and estimates that funds will be available for distribution to unsecured creditors.
Adam Stein-Sapir, who specializes in analyzing bankruptcy cases at Pioneer Funding Group LLC, said company revenues were estimated to be $200 million for 2015.
Given the sale of its Missouri and Kansas stores and loss of the Kansas Turnpike locations, Gas-Mart’s two most profitable stores, revenues could be as low as $150 million this year but could approach the $200 million estimate if gas prices remain high and remaining stores regain customers.
Bankruptcy records also indicate secured debt of about $25 million plus about $9 million in priority claims, which include tax claims and employee wage claims.
“The situation appears to be a perfect storm of events — litigation, a business with too much debt, and soft operating results,” Stein-Sapir said. “The convenience store business is a low-margin business, and their suppliers started to cut off their credit.”
Stein-Sapir said the bankruptcy filing also was clouded by long-standing litigation between the Georges and the Gustin family as well as other litigation affecting Gas-Mart.
Members of the Gustin family and the revocable trust of Abraham Gustin, founder of the Applebee’s restuarant chain, have owned half interest in both Gas-Mart and G&G.
Partly because of the Gustin disputes, a special custodian was appointed to oversee disposition of assets. That individual, John Sopinski, a certified public accountant who, in essence, was assigned to supervise Gas-Mart, was not involved in the bankruptcy filing.
Brendan McPherson, a Polsinelli attorney representing the Georges, said all previous litigation is stayed by the bankruptcy filing.
Gas-Mart has about 300 employees.
“They’re all aware of the filing. We told them this will give us what we need to fill the shelves, to get the customers back, and to move forward in our stores,” George said Monday afternoon.
He said the company’s gasoline suppliers, which are among the unsecured creditors, “are supportive and are working to help us.” Also, he said Gas-Mart was working to get a large grocery distributor to help restock stores shelves that were depleted when creditors stopped delivering.