Wilmington, Del. — An expected reopening of Tweeter’s stores has been delayed as parties continue to wrestle with the details of the company’s Chapter 7 bankruptcy, which was approved by a federal court here on Monday.
Employees were informed that it may be another week to 10 days before the liquidation sales would resume. Meanwhile, staffers continue to await back-pay and promised bonuses, and some $15 million in inventory, furniture and fixturing remains locked in the chain’s 70 remaining stores.
A motion by Tweeter to convert from Chapter 11 to Chapter 7 bankruptcy was granted by the United States Bankruptcy Court in Delaware after the company unexpectedly shut all its stores and terminated its staff. The conversion was to allow the retailer to continue liquidating its inventory and real estate, and to provide for a $900,000 fund from which employees were to be immediately paid accrued wages and commissions.
Whether the stores will reopen remains unclear, however, as the headquarters office have ceased operations and Tweeter’s liquidators filed an objection to the Chapter 7 conversion, demanding immediate payment for about $1.8 million in services.
Tweeter said in a court filing 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 was expected to resume liquidation under Chapter 7 and fund the employee payroll account. A separate $1.2 million trust to cover legal expenses was to be funded by Wells Fargo.
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.”
The 36-year-old chain, which was acquired last year by Schultze Asset Management after a previous bankruptcy filing, estimated its liabilities at between $50 million and $100 million.
Clickhereto read TWICE’s complete coverage of Circuit City and Tweeter.
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