Rhodes seeks approval to close Midwest stores, liquidate merchandise

By Caroline Salls

Pittsburgh, July 13 - Rhodes, Inc. requested court approval to close stores, conduct store closing sales and enter into an agreement for the liquidation of merchandise inventory and other assets, according to a Tuesday filing with the U.S. Bankruptcy Court for the Northern District of Georgia.

In the motion, Rhodes said the first step in closing the 15 Midwest stores is selling the $13.3 million of merchandise in the stores.

The stores and distribution centers to close will include those in Shaumburg, Downers Grove, Naperville, Niles, Joliet, Carol Stream and Champaign, all in Illinois, and Louisville, Ky., and St. Louis.

Rhodes also asked the court to approve an auction to select a merchandise liquidating agent and approval of a $300,000 break-up fee to be paid to the selected agent.

Also, the agent will be granted limited overbid protection by requiring that any competing bids provide for at least the break-up fee plus 0.5%.

Also, each subsequent bid will be required to be at least 0.5% over the preceding bid.

Following the auction, Rhodes will enter into an agreement with the agent selected as the highest bidder, conduct the store closing sales and cease operations at the locations to be closed.

In support of its decision to close the stores, Rhodes said: "Rhodes' management has determined that, due to unfavorable lease agreements, poor historical sales activity and/or various other negative factors affecting the Midwest market, the closing locations are currently unprofitable and will likely remain unprofitable in the future."

Under the proposed agent agreement, the agent will be obligated to pay to Rhodes 80% of the value of the merchandise located in the closing locations plus the greater of 1% of the proceeds generated by the sale of the merchandise sales plus 2% of the net proceeds of the sale of the additional merchandise or $400,000.

The auction will be held June 22. A hearing on the sales and agency agreement will be held on July 26.

Rhodes, an Atlanta-based furniture retailer, filed for bankruptcy on Nov. 4, 2004. Its Chapter 11 case number is 04-78434.

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