Sunbelt Nursery liquidates

Home Channel News, April 27, 1998 by Carol Tice

CAROL TICE

SAN JUAN CAPISTRANO, CALIF. - Less than two weeks after filing for Chapter 11 bankruptcy protection, Sunbelt Nursery is liquidating its 57 stores.

The specialty lawn and garden dealer initially announced it would continue to operate, but almost immediately arranged for the sale of part of its California-based Nurseryland Garden Centers chain to Armstrong Garden Centers, a 25-store retailer based in Glendora, Calif. The sale and/or liquidation of its remaining chains - TipTop Nursery in Arizona and Wolfe Nursery in Texas - was in progress at press time.

On April 8, the court approved the sale of eight of Sunbelt's 15 Nurseryland stores to Armstrong, said Jeffrey Pomerantz of the law firm Pachulski Stang Ziehl & Young in Century City, Calif., which is handling Sunbelt's bankruptcy proceeding. Armstrong will also purchase the inventory from the remaining Nurseryland stores. Pomerantz said Sunbelt will then try to market the leases of the seven units that are not part of the Armstrong sale.

Armstrong will pay $3.4 million in this deal and will ultimately keep nine of the stores open.

The nine-store TipTop Nursery is expected to be sold as a going concern, according to Pomerantz. Bidders include Summer Winds Garden Center, the newly formed company in Boise, Idaho, that recently purchased Woolworth's spin-off nursery chain in California. The highest bidder for Tip Top should gain ownership of that chain by mid-April. (NHCN learned that Walt Minnick, a principal at Summer Winds, bid $4.8 million for the stores Armstrong bid for but couldn't come up with the money in time to close this deal.)

In Texas, where 33 Wolfe Nurseries remain, a court has approved going-out-of-business sales, Pomerantz said. Two liquidators - Gordon Bros. and Schottenstein Bernstein Capital Group LLC - will serve as liquidators. Ten Wolfe store leases in the San Antonio and Austin markets are expected to be sold as a group, he added. Wolfe also has a distribution center and a plant-growing facility that might be included in such an agreement.

These sales and sell-offs are a swift ending to what has been a long decline for 69-year-old Sunbelt, which once boasted more than 100 stores. They also represent a swift conclusion to a bankruptcy proceeding that, at first glance, promised to be complicated. Sunbelt's Chapter 11 was filed as four separate cases, one for each nursery chain and a fourth under Sunbelt Management.

Together, the companies claim assets of $26.7 million and liabilities of $36.2 million. About $10.6 million of the debt is secured.

The three chains' largest unsecured creditors are all suppliers, primarily of green goods. The largest unsecured creditor is Powell Plant Farms of Troup in Texas, which is owed $556,225. Sunbelt's president, Timothy Duoos, owned 20 percent of the company at the time it filed for Chapter 11.

Shortly before the company filed for bankruptcy, officers of the company began to depart. Three Sunbelt directors, including John Tastad, who owned 8 percent of the company, resigned. Chad Ruth, who at one point had been Sunbelt's senior vp-operations, was elected to the board and is now a company consultant.

CFO Thomas Hoekstra departed and was replaced by Craig Koehler. Koehler and Duoos did not return calls from NHCN. On March 20, trading in the company's stock was suspended from the American Stock Exchange because the company no longer met certain criteria for being listed on the exchange.

Pomerantz said Sunbelt was unable to continue operating 'because of liquidity and financing concerns.' The company had obtained a new financing agreement with Paragon Capital early this year, but by early March was in default.

The company lost $4.5 million on sales of $29.1 million in the last six months of 1997. The losses continued despite cost-cutting moves, including moving its headquarters from Fort Worth, Texas, to a smaller facility in San Juan Capistrano.