Wilmington, Del. — Tweeter could reopen its stores as early as tomorrow morning to continue liquidation sales through the weekend under Chapter 7.
A motion by the retailer to convert from Chapter 11 to Chapter 7 bankruptcy was granted by a federal court here yesterday after the company shut all its stores and terminated its staff. The conversion will free up cash, allowing Tweeter to continue liquidating its inventory and real estate, and will provide for a $900,000 fund from which employees are to be immediately paid accrued wages and commissions.
TWICE has received reports from Tweeter workers who were either told to return to work tomorrow or received inquiries about their availability. Whether the stores will reopen remains unclear, however, as the headquarters office has essentially ceased operations and Tweeter’s liquidators have filed an objection to the Chapter 7 conversion, demanding immediate payment of about $1.8 million for services rendered.
All parties reportedly were back in the United States Bankruptcy Court in Delaware this afternoon to hammer out an accord.
Tweeter said in its motion that it was forced to cease operations on Dec. 1 after its cash well ran dry. The chain was unable to access funding from primary lender Wells Fargo once the bank was paid back in full under terms of the Chapter 11 filing, and secondary lender Schultze Asset Management — Tweeter’s corporate parent — was unwilling to foot the bill for continued closeout operations.
Schultze will resume liquidation under Chapter 7 and will also fund the employee payroll account. A separate $1.2 million trust to cover legal expenses is being funded by Wells Fargo.
Tweeter unexpectedly terminated its corporate staff Monday afternoon and shuttered all of its remaining 70 stores yesterday just days before a planned shutdown.
Neither Tweeter’s 600 employees nor its liquidators — which include Hudson Capital Partners, SB Capital Group and Tiger Capital Group — were given advance notice of the action, which left about $14 million in inventory and customer orders in limbo.
Tweeter filed for Chapter 11 bankruptcy protection last month, citing “a severe liquidity crisis brought on by slow sales caused by declines in discretionary consumer spending.”
Clickhereto read TWICE’s complete coverage of Circuit City and Tweeter.