Ashwaubeon-based Shopko may soon be forced to enter liquidation.
Shopko Note Holdings, the retailer’s largest landlord, asked a Nebraska bankruptcy judge to begin liquidation for the department store chain after the sale of its pharmacy assets did not meet its expectations.
Earlier this month, Shopko filed for Chapter 11 bankruptcy protection, citing adverse effects of a changing retail environment. Before filing for bankruptcy, Shopko marketed its pharmacy assets and sold a portion of that business to buyers, including Kroger Co.
Court records show attempts to sell its remaining pharmacy assets after filing for bankruptcy netted $52 million. Those results were “not satisfactory,” Shopko Note Holdings said in a court filing.
“Notwithstanding this exhaustive pre-petition process, the debtors’ efforts to find a pathway towards a reorganization have been unsuccessful,” the company stated in its court filing. “At no time over the past year and a half has an investor emerged willing to sponsor a reorganization plan.”
SNH’s statement to the court said the pharmacy auction was supposed to be the “main event” to sell a bulk of the pharmacy assets so the retailer could generate the funds needed to meet the approximately $84.2 million milestone in its debtor-in-possession (DIP) budget. The auction results show it’s clear Shopko will not achieve the goal, SNH said.
SNH also said in its filing that it provided Shopko with $35 million in first lien secured financing in January 2018. The firm also is a debtor-in-possession lender.
“The debtors are now constrained to pivot to comply with the sale milestones as set forth in the DIP Order and commence the liquidation of all of the debtors’ remaining assets and properties,” the filing said. “With the proverbial writing now on the wall, there is no reason for the debtors to wait until the next testing date under the DIP to do so.”