Swoozie’s Inc., the bankrupt Atlanta-based purveyor of paper products, party supplies and gifts, has found a stalking horse bidder which could purchase its assets at auction with a starting bid of $5.34 million.
The stalking horse, Newton, Mass.-based Hudson Capital Partners, is one of more than 40 strategic, going-concern and liquidation buyers—including Books-A-Million and Tiger Capital—that Swoozie’s courted in its search for a way out of its financial difficulties.
That’s according to recent filings in Swoozie’s Chapter 11 reorganization case in U.S. Bankruptcy Court for the Northern District of Georgia.
Swoozie’s, which lists debts between $10 million and $50 million and assets of less than $10 million, is represented by Dennis J. Connolly, Wendy R. Reiss, William S. Sugden and Sage M. Sigler at Alston & Bird. Hudson Capital is represented by J. Hayden Kepner Jr. at Scroggins & Williamson.
Court documents show that Swoozie’s is slated to hold the auction on March 25. Time is of the essence, because U.S. Bankruptcy Judge C. Ray Mullins has approved up to $3.5 million in debtor-in-possession financing from Wells Fargo that matures on April 15. That loan is in default, according to court documents, if a sale hearing is not held by March 29.
Founded in 1999, Swoozie’s grew to 43 stores around the country, but got into trouble after it purchased 13 stationery-and-party-products stores known as Blue Tulip out of bankruptcy about a year ago. Swoozie’s predicted an additional $12.8 million in sales as a result of the acquisition—but actual sales came up more than $4 million short, according to bankruptcy filings. Then, a “seismic shift in the economy” and a delay in closing a $3.1 million loan from Wells Fargo, according to court documents, prompted the company to file for bankruptcy.
Court documents contemplate that other bidders may bump Hudson Capital out of the running in the proposed Section 363 sale. If that happens, an agency agreement provides for a $75,000 break-up fee.
Other lawyers involved in the deal include Darryl S. Laddin and Michael F. Holbein at Arnall Golden Gregory as counsel to the Official Committee of Unsecured Creditors; James S. Rankin Jr. at Parker, Hudson, Rainer & Dobbs for Wells Fargo; and Mark I Duedall at Hunton & Williams for interested parties Gordon Brothers Group and Gordon Brothers Retail Partners.
The case is In re: Swoozie’s Inc., No. 10-66316.