Dive Brief:

• Mountain Express Oil  has requested the court’s permission to cease all operations and terminate its employees after its potential sale to Arko Corp. failed, according to an Aug. 16 hearing in the U.S. Bankruptcy Court for the Southern District of Texas.
• The bankrupt retailer also requested permission to cease all of its real estate property leases, dealer subleases, fuel supply agreements and “other agreements relating to the provision of goods and services to specific sites” during the hearing.
• Mountain Express’ debtor-in-possession (DIP) lenders have not agreed to these terms, noting that this proposal “is about as value disruptive as a Chapter 11 debtor can suggest in a case of this nature.”

Dive Insight:

As of a few days ago, an outright sale of Mountain Express’ assets to Arko — parent of c-store retailer GPM Investments — seemed to be the only option on the table. Judge David Jones said in a Monday hearing that “one way or another, [the deal] is going to be resolved this week.”

However, that’s no longer the case. 

In Wednesday’s hearing, Jeffrey Pomerantz, an attorney representing Mountain Express, said that although he’d hoped to announce that the lenders supported the proposed transaction, the lenders instead “decided apparently to punish” Mountain Express, its thousands of employees and other stakeholders with the company.

Arko’s proposed transaction has failed, according to court filings and the hearing. The Richmond, Virginia-based company submitted its $49 million bid for Mountain Express in an early August auction.

“In retrospect, Your Honor, the writing was on the wall the night before the auction,” Pomerantz, partner with law firm Pachulski Stang Ziehl & Jones, told the judge on Wednesday. “That's when Richard Marshall, a senior credit officer at Bank of Hope, and one of the lenders, told [Mountain Express’] investment banker that he would rather see [Mountain Express] burned in Chapter 7.”

Mountain Express is seeking authorization to pay all unpaid wages, benefits and taxes owed to its employees, Pomerantz said. Additionally, the retailer wants to pay up to $150,000 in paid-time-off claims that its employees are entitled to receive upon termination.

Moreover, Mountain Express is seeking court permission to allow the retailers it has fuel supply agreements with to “immediately procure fuel from alternative sources to allow them to mitigate their damages.” Several retailers have already sued for and been granted the right to find other providers in recent days, after a lack of fuel deliveries from Mountain Express threatened their businesses.

“The debtors’ professionals and independent directors did everything they could to keep this company alive,” Pomerantz said.

Mountain Express’s DIP lenders, who have funded its bankruptcy process, refute these requests. The lenders suggest “there are potential alternative paths forward,” and that Mountain Express didn’t “appropriately” vet its options, John Elrod, vice chair for law firm Greenberg Traurig's Atlanta Financial Restructuring Group, representing First Horizon Bank, said during Wednesday’s hearing.

“We're evaluating these options and believe that one or more of them can be accomplished through the appointment of a Chapter 11 trustee,” Elrod said. “And we believe these options will result in a superior return to creditors in the path proposed by [Mountain Express], which is apparently the dismissal of these cases.”

After both parties stated their arguments, Jones declared that a Chapter 11 trustee should be appointed to help facilitate progress and to help Mountain Express’ employees. 

The trustee was officially appointed to the case early Thursday morning, according to court documents.

“I'm not going to give up and say it's too hard to address, because there are people out there that are trying to make a living,” Jones said during the hearing. “I'm going to give it everything I can to make sure they get that opportunity.”

Meanwhile, Arko isn’t giving up hope. Along with several gas companies, an Arko representative said the company is still willing to be part of the solution.