Southern Season, the Chapel Hill-based gourmet food and kitchenwares retailer, will be put up for auction on Friday morning.
U.S. Bankruptcy Judge Benjamin Kahn will then hold a hearing Friday afternoon on whether to approve the sale of the company to the highest bidder. The deal could close Monday.
321 Capital Partners, a Maryland-based investment banking firm, is soliciting bids from private equity firms that specialize in buying distressed retailers to take over Southern Season and continue to run it. At a hearing Monday, Ervin Terwilliger, 321 Capital’s managing partner, testified about the need for a quick sale.
One of Southern Season’s lawyers, John Paul H. Cournoyer, asked Terwilliger: “Do you believe that a rapid sale timeline is necessary in this case and if so why?”
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Terwilliger responded: “I believe it’s absolutely a necessity to receive the highest value for the business. The business won’t survive another week without funding. It’s been made very clear to me throughout my conversations that there is not future funding for the business.”
If Southern Season does close its doors, Terwilliger said the business would be worth far less at auction.
Terwilliger said his company has secured an opening bid of $3.5 million from The Focus Properties. Terwilliger said 13 companies had seriously looked at the company’s books and he expected eight companies to potentially participate in Friday’s auction.
The gourmet food and kitchenwares store was started in 1975 and eventually became a $30 million retail business and an anchor tenant at University Place mall. However, it suffered financial setbacks after the 2008 recession and was bought in 2011 by TC Capital Fund, which is led by Chapel Hill entrepreneur Clay Hamner. Hamner, who became the company’s CEO, tried to replicate the success of the Chapel Hill store with its restaurant and cooking school in Richmond, Va., and outside Charleston, S.C. Those two locations closed earlier this year.
Last week, Dave Herman, president and chief operating officer, replaced Hamner as CEO.
The company filed for bankruptcy in late June. The court filing showed it had $9.8 million in assets, including $3.6 million in inventory, and $18.3 million in liabilities. Southern Season’s Chapel Hill store is still open, and the company operates three smaller Taste of Southern Season stores in Raleigh, Asheville and Charleston, S.C.
The company hoped to come out of bankruptcy by the end of the year. But the company has struggled while in bankruptcy. Southern Season secured a $1.4 million loan from Silk Route Capital Corp., which was made up of some of its original investors in 2011. But the company only received $372,000 from Silk Route, according to court records.
A lawyer for Summit Bridge, Southern Season’s largest secured creditor in bankruptcy, which is owed $4.4 million, had demanded the company’s sale at a recent hearing saying it would oppose any more interim financing for the Chapel Hill retailer.