WILMINGTON, Del. — A U.S. Bankruptcy Court judge on Wednesday approved the liquidation of Gottschalks, a storied department store chain whose inventory will be sold lock, stock and barrel to pay off crushing debts.
The liquidation sale approved by Judge Kevin Carey after last-minute negotiations will begin today and last about 10 weeks.
"It's very tough," said Gottschalks Chief Executive Officer James Famalette, pausing to wipe tears. "If we could have had more time, we could have saved (the store)."
But even as a consortium of liquidators moves in to sell the inventory from 58 department stores and three specialty stores, Famalette held out some hope Wednesday that some version of the 105-year-old chain might yet arise out of Chapter 11 bankruptcy.
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Famalette said a Chinese company, Shandong Commercial Group, remains interested in keeping the store open in some fashion.
Famalette said he remains "in communication" with the Chinese firm. Potentially, attorney Stephen Warren told the court, Shandong could be in a position to buy the Gottschalks name as well as some of its store properties.
"I'm sure the employees would be in favor of that," Carey said.
A consortium of liquidators including SB Capital Group of New York, Tiger Capital Group of Boston, Great American Group of Los Angeles and Hudson Capital Partners of Newton, Mass., beat out one other competitor Monday.
The auction lasted 12 hours and went through "dozens of rounds," said Warren, who represents Gottschalks.
The winning consortium guaranteed a 98 percent return on Gottschalks' inventory costs, which are valued at about $106 million.
An additional $3 million was offered for fixtures and equipment. Warren and Famalette called this a good price. The revenues will be used to pay the stores' creditors, whose names are spelled out in more than 500 pages of court documents.
James L. Schaye, president and chief executive officer of Hudson Capital Partners, said Gottschalks' customers will be seeing "going out of business signs" and "progressive discounts" starting today. He said he will be striving to "keep the integrity of the store" alive even as the sale proceeds, although the end point is predetermined.
"We will sell everything," Schaye said.
Land comes later
But Gottschalks' real estate holdings, including its Fresno headquarters, are being sold separately. Carey set a May 15 date for an auction of the company's leases, and a July 7 date for an auction of the chain's San Luis Obispo store. The other real estate property will be auctioned later.
Shandong was not able to clear Chinese government regulatory hurdles in time to offer formal bids at the Monday auction.
"It's a little bittersweet, to say the least," Gottschalks attorney Warren said. "This is a company that has faced incredible obstacles over the past six months."
Carey formally accepted the liquidation proposal, after an off-and-on hearing that lasted several hours. During an extended break, negotiators worked out final agreements, including how to handle the inventory from Estée Lauder, which doesn't want its brand name hurt by having prestige products sold at a discount.
Famalette composed himself after the hearing ended, citing "the emotional drain of the last three or four months," even as he expressed hope that the Chinese business group might yet keep the Gottschalks name alive.
"We're going to do everything we can to keep them interested," Famalette said.
Bureau reporter Michael Doyle can be reached at firstname.lastname@example.org or 202-383-0006.