Bankrupt HHGregg plans to liquidate if no buyer found in next week

Indianapolis-based retail chain HHGregg, which filed for Chapter 11 bankruptcy protection on March 6, has filed a plan with the court to close its 132 stores and liquidate its remaining merchandise if it can’t find a buyer for the business within the next week.

In a public filing with the U.S. Securities and Exchange Commission on Friday morning, the retailer said it has entered a consulting agreement with liquidation firms Tiger Capital Group LLC and Great American Group LLC. 

The retailer is working to find a buyer for its business. At the same time, it’s laying the groundwork for liquidation as “a precautionary measure in the event no acceptable going concern bids are received by the upcoming bid deadline of April 7,” HHGregg said in the SEC filing.

HHGregg’s liquidation proposal must be approved by the court. Judge Robyn Moberly, who is hearing the case in U.S. Bankruptcy Court in Indianapolis, has not yet issued an order on the matter.

If HHGregg ends up liquidating, store closings would begin April 8 and conclude by May 31.

Under the terms of the agreement, the liquidators would sell off the merchandise at HHGregg’s remaining 132 stores plus its 14 distribution centers. The liquidators would also dispose of furnishings, fixtures and equipment in these locations.

In return, the liquidators would earn a fee of 1.25 percent of gross sales proceeds.

In a previous round of closures announced March 2, HHGregg said it would close 88 of its 220 stores and three distribution centers.

In the event that it cannot find a buyer for the business, liquidation is “the best method to maximize recoveries to the estates and to stop the rapid deterioration of the debtors’ business at such locations,” the company said in a bankruptcy document filed Thursday.

The retailer said it intends to honor customer gift cards and gift certificates up to $2,850 per person for the first 14 days of the closing period.

But there won’t likely be anything left over for common shareholders, HHGregg said. 

“Based on the terms of the Consulting Agreement, the Company does not anticipate any value will remain from the bankruptcy estate for the holders of the Company’s common stock, although this will be determined in the continuing bankruptcy proceedings,” the statement said.

Friday’s announcement represents an accelerated timetable from the retailer’s previous plans.

When it filed for Chapter 11, HHGregg said it had reached an agreement to sell the business to an undisclosed party. 

On March 16, the retailer said that deal had fallen through and that it was accepting bids from other interested parties through April 21. In a press release issued that day, HHGregg CEO Robert Riesbeck said the company had other possible acquirers. 

"We have received strong interest from third parties interested in buying some or all of the company's assets," Riesbeck said.

But the company found that it needed to move more quickly than originally planned, according to court documents.

In a bankruptcy filing, HHGregg consultant Joseph Malfitano of Malfitano Advisors LLC said that around March 20 he became aware that “there may be an urgent need” to begin the process of finding a liquidator because of HHGregg’s liquidity status and its inability to secure new inventory to replenish its stores.