Hofmeister Personal Jewelers Inc. may be a step closer to emerging from a year-long bankruptcy reorganization after receiving a judge’s approval to search for alternative financing to pay existing debt.
Hofmeister, one of Indianapolis’ best-known jewelry stores, filed for Chapter 11 reorganization in April 2011, listing assets of nearly $3.8 million and liabilities of $5.4 million.
On Monday, Judge Basil H. Lorch III granted Hofmeister’s request to hire Cincinnati consultant Charles & Associates despite objections from the jeweler’s unsecured creditors.
Hofmeister is seeking a lender to refinance existing debt and to provide more working capital. It said it will pay Charles & Associates a $10,000 retainer fee and 3 percent of the new loan amount.
The jeweler did not list in court documents the amount of financing it’s seeking. But an attorney for the unsecured creditors said the consulting fee could range between $45,000 and $55,000 based on the outstanding balance of a PNC Bank loan.
The estimate equates to a balance of roughly $1.5 million. At the time of Hofmeister’s bankruptcy filing last year, the jeweler owed the downtown Indianapolis office of the Pittsburg-based bank $2.5 million.
“[Hofmeister] has not demonstrated how, if at all, this will benefit the estate of any of its creditors other than PNC and the insider guarantors, but will only serve to diminish estate assets,” Marc Alexander Beatty, attorney for the unsecured creditors, said in a court filing.
Beatty, of local law firm Katz & Korin PC, further argued that Hofmeister has yet to file a reorganization plan and has not indicated what other efforts, if any, it has taken to locate financing on its own.
Hofmeister’s attorney, Eric Redman, said in court documents that the agreement with the consultant will result in a quicker bankruptcy resolution and a stronger chance unsecured creditors will get paid.
This is not the first time during bankruptcy proceedings that Hofmeister has sought help from an outside consultant.
In October, it received approval to hire Pittsburgh-based LFS Consultants to help it move merchandise during the Christmas shopping season and through Valentine’s Day.
LFS, which specializes in helping jewelry retailers move or liquidate stores, was hired to bring additional inventory into the store and generate more short-term cash to benefit Hofmeister and its creditors, a court filing said.
Hofmeister owes dozens of unsecured claims, including $1.1 million to Gems One Corp. in New York for inventory and $300,000 to PNC Bank for a townhome in Steamboat Springs, Colo. Hofmeister’s operates a small store there.
The jeweler had revenue of $5.2 million in 2010, according to the bankruptcy filing.
Through the first two months of this year, Hofmeister earned $49,826 in profit on $442,452 in revenue, monthly operating reports said.
Gary Hofmeister founded the store in 1973 in downtown Indianapolis. The retailer later moved to the basement of Glendale Mall and, in 1992, to the current free-standing location at Clearwater Crossing.
Gary’s son, Carter, owns 85 percent of the business and manages operations, according to the filing.