CHIPPEWA FALLS, Wis. — Members of the Schafer family are part of a group negotiating to buy six stores of the financially troubled Gordy’s Market chain, including locations in Chippewa Falls and Cornell.
“Assuming we complete discussions, those stores will be sold,” said Madison attorney James Sweet, who is representing a group that is forming a company separate from Gordy’s Market.
Sweet spoke at Thursday’s hearing, where Chippewa County Judge James Isaacson approved the sale of 11 stores that were in an auction in Milwaukee on Monday.
Members of the Schafer family have owned and operated the Gordy’s since its inception in 1966.
Sweet said the group he represents wants to buy Gordy’s stores in downtown Chippewa Falls, Lake Wissota, Cornell, Ladysmith, Barron and Chetek. He did not give a timetable on when an agreement could be reached with the court appointed receiver, attorney Michael S. Polsky.
“Today’s decision kind of breaks the log jam,” Sweet said of Isaacson’s decision to allow the sale of the 11 stores, including the now closed Chippewa Crossing store on the southside of Chippewa Falls.
Sold on Thursday were locations in Black River Falls, Osseo, Augusta, Whitehall, Shell Lake, Spencer, Rice Lake, and closed stores on Hamilton Avenue and Clairemont Avenue (near Shopko), both in Eau Claire, Hayward and Chippewa Commons. Isaacson said the sale of the Rice Lake store will be contingent on actions taken by the Small Business Administration, which is owed money.
Gordy’s closed store in Stanley was not included in Thursday’s hearing, and no mention was made of it being sold during Monday’s 11-hour auction.
The sale of Gordy’s stores in Arcadia, Galesville and La Crosse is being held up to hear objections filed by grocer Quillin's, and the objection of grocer Hansen’s IGA over the sale of a store in Neillsville to Family Foods. Judge Isaacson set a hearing at 2 p.m. Friday, Oct. 27, to hear those objections.
Grocery supplier Nash Finch filed a lawsuit against Gordy’s Market, seeking $86 million while Settler’s Bank of Madison is seeking $4.9 million. As secured creditors, both will receive money from Thursday’s sale.
Polsky said Nash Finch will get $876,000 of the sale proceeds, while Settler’s will get $1.5 million from selling the Black River Falls store to Hansen’s IGA and $400,000 for selling the Spencer store.
Great Lake Foods is buying stores in Osseo and Augusta and Family Foods is buying the Whitehall store. Polsky noted the Shell Lake store is being sold to an individual by Nash Finch for $1,000.
Besides buying four closed locations, Hilco Global is buying the Rice Lake store. The company based in Northbrook, Ill. bills itself as a financial services holding company and an independent financial services. It should be noted that the properties Hilco are buying, including the southside Chippewa Falls location, may be used for something other than as grocery stores.
Polsky said with the except of the Shell Lake store, all of the bids in Monday’s auction were in excess of the underlying value of the stores. “The auction was in good faith,” he said.
Attorney Christopher J. Stroebel, representing Northwest Wisconsin Refrigeration and Huiras Construction, took exception to the auction. Both companies are unsecured creditors, meaning they will get paid only if there is money left over from what goes to Nash Finch and Settler’s Bank. Strobel said Huiras is owed $228,000 while Northwest Wisconsin Refrigeration is owed $370,000.
“Polsky acknowledged at the last hearing (on Sept. 15) that unsecured creditors are out of the money,” he said. About the auction, he said: “I believe that the law has not been followed.”
He said Nash Finch and Settler’s should not be allowed to benefit from what he termed an illegal sale, and asked Isaacson to put the sale proceeds in escrow.
“The receiver (Polsky) had worked closely with Nash Finch to the detriment to the unsecured creditors,” Stroebel said. “The receiver has a conflict of interest.”
To that, Polsky strongly objected. “Counsel’s remarks are totally inappropriate,” Polsky said.
Nash Finch attorney Carla O. Andres came to the support of Polsky. “There has been no evidence at all that the receiver has acted inappropriately,” said Andres, who sat next to Polsky in the courtroom. She said to do the process differently would have meant the immediate shutdown of all 26 Gordy’s Market stores and the layoff of employees.
Sweet defended the auction and the decision to go with a receiver under a method spelled out in what’s called Wisconsin Chapter 128, a voluntary debt consolidation plan.
“The debt (of Gordy’s Market) was so overwhelming that the unsecured creditors were out of the money,” Sweet said.
In the end, Isaacson approved the sale of the 11 stores.
“I think it was appropriate to stop the bleeding and sell the stores,” Isaacson said.