Following a contentious hearing this week, Christmas Tree Shops’ bankruptcy was converted to a Chapter 7 liquidation, a development that has loomed for weeks.
The retailer sought Chapter 11 protection in May, with plans to close about 10 stores but stay in business. In June, the retailer said it would likely liquidate if it couldn’t find a buyer; weeks later, with no buyer in sight, the company said all stores would go out of business.
In July, unsecured creditors advised swifter liquidation, saying the retailer’s sales had fallen short of projections, resulting in inventory shortfalls and over-advances on its debtor-in-possession financing. Its budget also failed to account for certain expenses including employee costs and its DIP loan repayment, the creditors said.
The charges continued at a hearing on Wednesday at the U.S. Bankruptcy Court for the District of Delaware, where, according to a report from Reuters, attorneys for Christmas Tree Shops complained that Hilco Global’s store-closing sales were short $14 million, while Hilco attorneys argued the retailer over-promised employee bonuses and over-tapped its loan.
Bankruptcy Judge Thomas Horan stepped in to give the parties notice that attorneys and other professionals wouldn’t see their fees if store employee wages weren’t paid. “This case is not going to be run on the backs of employees, that's just unacceptable," he said, per Reuters report.
In an agreement reached at that hearing, Hilco Global-owned ReStore Capital will fund more than $1 million of Christmas Tree Shops’ store employee payroll obligations and other expenses, according to court documents.
