Alpha Omega allowed to keep selling
Court and creditors prepare for auction
A federal bankruptcy judge approved a series of petitions from Alpha Omega Jewelers yesterday that will allow the stores to continue selling and repairing merchandise as its chief creditor prepares to put it on the auction block at the end of the month.
Judge William C. Hillman approved all but two of Alpha Omega's 14 requests during the company's first bankruptcy hearing, which drew to a Hyannis courtroom yesterday morning more than a dozen lawyers representing creditors.
The hearing was held on Cape Cod because lawyers are hoping for a speedy resolution of the case and the judge was already scheduled to sit in Hyannis that day.
Hillman deferred deciding on two requests - to retain Consensus Advisors LLC's Michael O'Hara and Altman and Co. LLC's Gordon Lewis as chief restructuring officer and chief financial officer, respectively, until next week. Alpha Omega and its bank appointed the two men to run the business on Dec. 21, the same day the retailer's sole directors and suddenly-absent owners, Raman and Nilma Handa, e-mailed their written consent from India to file for bankruptcy.
While some of the permissions granted by Hillman tended toward the prosaic, such as allowing the nearly 30-year-old retailer to continue using its already printed letterhead stationery, Alpha Omega's attorneys said approval of these "first-day" pleadings was essential to their Chapter 11 bankruptcy case and the auctioning of assets.
Unsold inventory and unpaid bills have dogged the family business throughout the year, prompting the Handas to search, unsuccessfully, for a buyer or investor since last spring. The stress of a failing business apparently prompted Raman Handa to check himself into a local hospital in mid-December and to leave the country with his wife, son, and daughter - all of whom hold senior roles at Alpha Omega - without notifying relatives or business associates a few days later. Their disappearance stunned the company's bank, the LaSalle Business Credit arm of Bank of America Corp., which ceased funding the jeweler's operations and seized its assets just before Christmas.
Alpha Omega owes roughly $30 million to more than 100 parties, including The Boston Globe, whose claim exceeding $1 million makes it the largest unsecured creditor. Lewis said the book value of the company's assets stands at approximately $21 million. The judge approved a process to auction off Alpha Omega's assets around Jan. 24, with the first bid already entered through a joint venture by Tiger Capital Group LLC and Gordon & Co. offering 70.25 percent of the cost value of the inventory. The next bid must be for at least 1.25 percent more to cover the $200,000 breakup fee that Alpha Omega has guaranteed Tiger-Gordon for being the backup bidder. The jeweler estimates its inventory was worth $18.7 million on Dec. 31, which means the joint venture's bid is worth about $13.1 million.
Alpha Omega anticipates a lively auction. In November, Consensus Advisors contacted 40 parties about investing in or buying the troubled jeweler, and 15 of those agreed to confidentiality agreements to explore the opportunity, according to the bankruptcy filing. Three of them, the filing states, then expressed "serious interest," but two "ultimately passed, citing, among other things, their inability to conduct appropriate levels of due diligence in a compressed timeline, especially around the winter holidays."
"For a good auction to occur, you only really need two" interested parties, O'Hara said during a conference call with reporters Thursday.
In the meantime, the watches, rings, and other items that Alpha Omega sells - at hundreds of dollars to as much as $400,000 each - will lower the proceeds of the auction. O'Hara said January is "not an incredibly active month" for retailers like Alpha Omega, but "we do have Valentine's Day coming up in February, so we'll get some" sales.
The stores - in Harvard Square, the Prudential Center, the Burlington Mall, and the Natick Collection - will continue accepting gift certificates, gift cards, and store credits. As of Jan. 2, approximately $503,000 worth of gift certificates, gift cards, and store credits had not been redeemed, according to the bankruptcy filing. Customers also will be able to return merchandise for cash, store credit, or other inventory within 14 days of purchase, as has been the practice. Alpha Omega will continue handling special orders, for which various customers have paid $196,000 in deposits, and accepting and applying layaway deposits, for which customers have paid $133,000.
Nicole C. Wong can be reached at nwong@globe.com. 