A bankruptcy hearing is scheduled for June 9 for a judge to approve the sale of non-profit book seller and missionary organization Family Christian Stores.
FC Special Funding, the proposed buyer, won an auction in May with a bid ranging from $39-41 million under which the company would continue to operate and assume some debt, court documents showed. FC Special Funding’s offer includes a $23 million credit bid from J.P. Morgan Chase.
Family Christian and affiliates filed for Chapter 11 on Feb. 11 in the U.S. Bankruptcy Court for the Western District of Michigan. The filing included a stalking-horse bid from FCS Acquisition that was eventually withdrawn.
The company, which is based in Grand Rapids, Mich., filed for bankruptcy with loans dating from 2012 that were put in place for general working capital and to facilitate an acquisition of the business.
The loans included a $40 million revolver under a November 2012 credit agreement, under which the debtor owes $23 million. J.P. Morgan Chase Bank is the agent.
The company also owes $34 million under a $38 million term loan agreement, also from November 2012. Credit Suisse is agent. The lenders are Credit Suisse Loan Funding, Medley Capital, Congruent Credit Opportunities Fund II, and Main Street Mezzanine Fund.
The debtor also owes $40 million in trade debt to suppliers and vendors.
The company sells Christian books, music, DVDs, church supplies, and other Christian-themed merchandise through 266 stores, mail-order catalogs, and online.
Operations have been weakening since 2008. Sales totaled $305 million in fiscal 2008 and had dropped to $230 million by fiscal 2014. Sales in fiscal 2015 are forecast at $216 million. The company blamed its financial problems on the recession that began in 2008, and declining industry trends that have generally hurt music and book sales.
Since the company operates as a non-profit, any available profits, as well as collected donations, fund charitable causes and missionary work, including Bible donations in Latin America and Africa, care for orphans and widows, international adoptions, rescue of women enslaved in sex trafficking, and mission trips.
The company was established in 1931 with Zondervan retail stores, later changing its name to Family Bookstores, and finally to Family Christian Stores in the 1990s after changing hands.
The operating company is owned by a Georgia-based non-profit, Family Christian Resource Centers. Because of the financial difficulties, the debtor has only paid around $300,000 to the parent company since 2012 for its mission causes, excluding third-party donations collected by retail stores.
Chicago-Based middle-market private equity firm Madison Dearborn Partners bought privately held Family Christian Stores in 1999. Before the sale, the company had been considering financing alternatives after shelving plans to list shares in an IPO in October 1998 due to market volatility. The company was acquired by the endowment arm of Minneapolis-based Christian Investors Financial in November 2012, S&P Capital IQ showed.
Main Street Capital, a BDC that trades on the NYSE under the ticker MAIN, had a non-accrual loan to FC Operating in its portfolio in the recent quarter. That investment comprised $5.4 million of secured debt due November 2017 (L+1,075, 1.25% LIBOR floor). The fair value was marked at $3.2 million as of March 31, 2015, versus $4.1 million at fair value as of Dec. 31, when it wasn’t in bankruptcy or on non-accrual status.
Medley Capital’s investment portfolio showed a $10.4 million (L+1,075, 1.25% LIBOR floor) first-lien term loan due 2017 to FC Operating on non-accrual status as of March 31. The loan was marked at $6.3 million at fair value. Medley Capital is a BDC that trades on the NYSE as MCC. – Abby Latour
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