National furniture retailer American Signature is seeking a bankruptcy court's approval to put most of its stores and distribution centers up for sale in a move that faces opposition and may signal the company's potential liquidation.
American Signature wants to list the leases for 89 stores and distribution centers for sale in Baltimore, Chicago, Indianapolis, Pittsburgh and other markets, according to a court filing. American Signature filed for Chapter 11 bankruptcy protection in November, citing a steep decline in sales due to tariffs, inflation and the weak housing market.
In conjunction with its bankruptcy, the Columbus, Ohio-based company announced plans to close 33 locations of its namesake and Value City Furniture stores. American Signature operated about 120 stores in 17 states when it filed for bankruptcy. In December, it started an auction for about two dozen store leases in 12 states that has not yet concluded.
The U.S. trustee for American Signature's bankruptcy case has opposed the proposed sales listing, citing a conflict of interest between the company and its preferred brokerage, A&G Realty Partners. The trustee, Andrew Vara of the U.S. Department of Justice, said that the conflict stems from the fact that affiliates of A&G's owners are American Signature's landlords for 36 of the properties that are slated for sale.
"A&G's interests in both sides of the proposed transactions with these landlords create an unavoidable conflict of interest and prevent A&G from holding an undivided loyalty to the debtors' estates," Vara said in a Monday court filing.
"The debtors have a fiduciary duty to their estates and creditors to maximize the value to their estates in connection with these transactions," Vara said. It added "that duty fundamentally diverges from the interests of the landlords whose leases are covered" by a services agreement between American Signature and A&G.
American Signature and A&G had not filed responses to the U.S. trustee's objection as of Wednesday morning. An A&G spokesperson declined to comment to CoStar News. American Signature did not respond to requests for comment. A hearing on American Signature's request to retain A&G is scheduled for Wednesday.
Still, American Signature may liquidate and wind down its operations, depending on whether the court approves its preferred stalking-horse bidder for its assets.
Last month, American Signature filed notice with the bankruptcy court that affiliates of the Schottenstein family are the company's preferred stalking-horse bidder, meaning they can set the initial bid for the assets. The Schottenstein family, a major shareholder of American Signature, submitted a bid of $148 million for the company. A hearing to approve the bidder is scheduled for Jan. 28.
For the record
Pachulski Stang Ziehl & Jones is American Signature's legal counsel in the bankruptcy case. Berkeley Research Group serves as the restructuring adviser, and SSG Capital Advisors acts as the investment banker.