Family Christian Stores’ Closing Has Left Publishers and Lenders to Absorb Millions In Unpaid Debt

A Family Christian Store in Gainesville, Fla., in March. (Pat Canova/Alamy)

The news earlier this year that Family Christian Stores would close its more than 240 retail shops startled many of its customers. But it didn’t surprise anyone familiar with the company’s recent history. Despite receiving forgiveness for more than $80 million in debt two years ago, the company still couldn’t pay all of its bills.

The closing of Family Christian Stores left suppliers, including Christian book publishers, on the hook to absorb millions of dollars in losses.

Family Christian’s recent troubles started in 2012, when a group of Atlanta businessmen bought the chain from private investors and converted it into a nonprofit organization. The new owners financed the purchase with up to $78 million in bank loans and promised to use the company’s profits for the care of widows and orphans.

Over the course of three years, Family Christian donated $300,000 of its proceeds to missions-related causes, according to court filings from the company’s bankruptcy.

When it declared bankruptcy in early 2015, it had racked up $127 million in debt. One of the three Atlanta investors, Richard Jackson, had already paid millions of dollars to JPMorgan Chase & Co., presumably to avoid a loan default.

After months of wrangling with attorneys and creditors in court, Family Christian was able to reorganize as a newly formed company that would keep close to $40 million in liabilities—a portion of which had been secured by Jackson—and walk away from the rest. (The new company also assumed $48 million worth of leases and contracts.)

“They tried to keep most of their stores open, [but] had reduced terms from many vendors,” said David Lewis, executive vice president of sales and marketing for Baker Publishing Group, one of Family Christian’s suppliers. “We just figured there was no way in the world that they could remain open without a constant infusion of capital from their owners.” Family Christian lost about $16.6 million over about 17 months during the bankruptcy, according to court documents.

Publishers trod lightly with Family Christian after the bankruptcy. Jonathan Merkh, vice president and publisher at Howard Books, told Publishers Weekly his company sold products to the store on a pay-as-you-go basis, as opposed to offering them on credit.

In February Family Christian representatives called both Baker and Tyndale publishing groups. Lewis said they asked Baker Publishing for more time to pay invoices and for a 15 percent price discount, and Baker said yes.

But others, including Tyndale, had gone as far as they could to help the struggling retailer. “They asked us for humongous increases in the discount at which we were selling to them, and we just said, no, we’ve already given you our best deal,” Tyndale CEO Mark Taylor said.

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SOURCE: WORLD
Lynde Langdon