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Hofmeister seeks financing to emerge from bankruptcy

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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.
 

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  • Best Wishes
    I am sorry to hear of the financial woes of Hofmeister Jewelers. I wish them the best and hope that they can emerge out of this bigger and better than ever. Their customer service is wonderful and I love their merchandise.

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  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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