Springfield, N.J. - Troubled A/V specialty chain Sixth Avenue Electronics has been ordered to cease operations under a temporary restraining order issued over the weekend by a U.S. District Court in New Jersey.
The action was brought by GE Commercial Distribution Finance Corp. (CDF), which said the privately-held dealer had defaulted on a floor-planning loan and was disposing of its remaining inventory without repaying its debts.
"If the borrower's actions continue, the remaining collateral may be dissipated, concealed, or sold to innocent third parties," CDF said in court papers.
Sixth Avenue was also ordered to post a $24 million bond and to appear at a hearing in Newark, N.J., on Wednesday.
Pending a liquidation agreement between the two parties, the court could allow CDF to seize Sixth Avenue's estimated $12 million in remaining inventory, along with equipment and fixtures.
Calls to Sixth Avenue's senior management were not returned, and longtime company spokesman, operations VP Tom Galanis, left the business last month after 23 years with the chain.
According to court documents, the retailer missed a $2 million payment on Sept. 12 and voluntarily surrendered some of its inventory to the GE division on Sept. 21 to help cover an outstanding balance of $6.7 million in principal and interest.
CDF similarly sought seizure of Sixth Avenue's assets in March following a previous loan default. The crisis was averted after the retailer made "a significant payment and other concessions," court papers show, aided by an outside investor who acquired a 33-percent stake in the business.
Sixth Avenue never identified its non-operating partner, although GE sent default notices to Albert Houllou, a principal of Broadway Photo and numerous CE e-commerce sites, in addition to members of the founding Temiz family.
The 27-year-old chain, which was forced to close 16 of its 19 stores this year, was also sued by Toshiba America Information Systems on Sept. 30 for $1.2 million in unpaid purchases.