Best Products to expand even while in Chapter 11

Discount Store News, May 17, 1993

RICHMOND, Va. -- Best Products is resuming an expansion program while it seeks to develop a Chapter 11 reorganization plan, and is set to open five new showrooms this fall in recycled stores.

The cataloger also plans to open three more showrooms this year to boost its count to 162 stores. It projects adding 10 showrooms in 1994. In past years, as part of its bankruptcy proceedings, Best closed 41 showrooms.

Separately, a hearing is scheduled at press time on the cataloger's request for an extension until the end of September on its filing of a bankruptcy reorganization plan. The plan was due to be presented last month to the U.S. Bankruptcy Court for the Southern District of New York.

Resumption of Best's expansion came as the company reported that sales in the fiscal year ended Jan. 30 fell 2.1% to $1,408 million from $1,438 million, while its loss before reorganization expenses and taxes was cut by a third to $12.1 million from $36.5 million.

Best requested the reorganization plan extension at the end of January (see DSN, Feb. 1, page 3) as any plan could involve funds that may be recovered from the various parties that were involved in the cataloger's 1988 $1.14 billion leveraged buyout. LBO expenses eventually saddled it with the debt that led to its Chapter 11 filing in January 1991.

Efforts to recover such funds through negotiations failed and the cataloger can now litigate the matter. Developing a reorganization plan could depend on the outcome of a pending lawsuit, a Best spokesman said.

The cataloger had filed the suit in December 1992 in the bankruptcy court seeking recovery of an undetermined amount of funds that it stated "might range in the hundreds of million of dollars." At that time it asked for a stay until the end of last month as it hoped it could reach a "consensual agreement," the spokesman said. "This hasn't happened and Best now can litigate the matter."

Best is suing Adler & Shaykin, an investment company that engineered the LBO and now owns the privately held retailer; its founders, Sydney and Frances Lewis; a number of former executives; and more than 20 banks and financial institutions that fund the LBO. It's also suing a score of former outside stockholders that owned at least 1,000 shares each.

The five new Bests involve the recycling of former 40,000-sq.-ft. Brendle's showrooms in Durham, N.C., (Oxford Commons center), and Chesapeake (Crossways Center), Newport News (Newport CrossingCenter), and Colonial Heights (Petersburg), Va., (Southpark Shopping Center), and a 57,545-sq.-ft. store in The Convenience Center at Hamilton Mall in Mays Landing, N.J., that had housed Child World and Wall-to-Wall Sound.

Best will configure the former Brendle's to the cataloger's Diamond Two format by adding 10,000 sq. ft. to the stores and putting in its graphic and display program. Brendle's used a showroom format similar to Best's, so these stores don't need extensive remodeling, the Best executive said.

The New Jersey store will be completely remodeled to the Diamond Two format.

Brendle's, based in Elkin, N.C., filed a Chapter 11 petition in November 1991. The U.S. Bankruptcy Court for the Middle District of North Carolina approved the assignment of Brendle's leases to Best, which worked out agreements with various landlords. Child World and Wall-to-Wall Sound aren't in business.

Best's initial expansion took place last year when it unveiled showrooms in Ohio in Huber Heights (Dayton) (50,000-sq.-ft.) and Medina, the latter a recycled former 60,000-sq.-ft. Kmart. These showrooms also follow the Diamond Two format used in remodeling a Norfolk, Va., unit earlier in 1992 as an update of the Diamond prototype used in refurbishing a half-dozen Philadelphia market Bests in 1991.