Bankruptcy case could force public sale of Myrtle Beach-based Burroughs & Chapin stock

dwren@thesunnews.comJanuary 26, 2013 

— Shares of stock in Burroughs & Chapin Co. Inc. – almost exclusively owned by family members of the privately held real estate and development company – soon could become available to the general public under the terms of a settlement agreement in a bankruptcy reorganization case working its way through the court system.

The agreement between Conway National Bank and B&C shareholders Larry and Virginia Biddle calls for the bank to advertise the sale of 6,300 shares of B&C stock starting March 15 to help pay off a nearly $900,000 debt. Conway National would offer the stock at a minimum of $92.89 per share – the 2011 book value of the stock – or its as-yet-undetermined 2012 book value, whichever is greater, according to the settlement agreement filed last week in federal bankruptcy court in Charleston.

The stock would be sold at the best price the bank receives by April 15, the agreement states. The bank expects to generate a minimum of $585,207 from the sale. Other creditors in the bankruptcy case have until Feb. 6 to file an objection to the settlement agreement, and a hearing would be held on Feb. 12 if an objection is filed. A proposed order approving the agreement already has been submitted to Judge David Duncan, who is expected to sign the order if no objections are filed.

If a public sale is approved, it would be among the largest chunks of B&C stock available to the general public in the history of the company, which has been a driving force for development on the Grand Strand . Larry Biddle said some B&C family members previously have given or sold small numbers of shares to friends – largely so those non-B&C individuals could enjoy company perks, such as free golf at Myrtlewood Golf Club and free rides at the former Myrtle Beach Pavilion amusement park – but the stock has never been sold on the open market.

George Cauthen, a Columbia lawyer representing Conway National Bank, declined to talk about the bank’s plans should the stock sale be approved. B&C officials also declined to comment on the value of the stock, the number of outstanding shares or whether the company would try to buy back the 6,300 shares involved in the Biddle bankruptcy.

“As a privately-held company, Burroughs & Chapin Co. Inc. doesn’t give out specific information concerning its stock,” said company spokeswoman Lei Gainer.

However, in a July letter to the U.S. Securities and Exchange Commission, B&C President Jim Apple described the company as having a “family oriented shareholder base” with about 250 shareholders.

“A large majority of the company’s share transfers are to lineal descendants or other relatives through gift or bequeath,” Apple stated in the letter. “At any one time, there may be multiple generations of family members who are shareholders . . .”

Apple wrote the letter to the SEC to propose changes in the federal Jumpstart Our Business Startups (JOBS) Act that would help B&C avoid public registration if its number of family shareholders continues to grow.

Larry Biddle – whose wife is a part of the Burroughs family – said the stock is worth much more than the minimum amount the bank has set for the proposed sale, adding that the 2011 book value was set at a time when B&C had stopped paying dividends on the stock. The company has since resumed paying dividends to shareholders, although Biddle said he does not know the current book value of the stock.

The Biddles also pledged 454 shares of B&C stock to T&D Bank as collateral for another loan, according to court documents. The Biddles valued those shares at $250 apiece in their financial statement filed with the court. Those shares are not part of any proposed sale, court records show.

Biddle also said he is hopeful an alternative solution can be reached before the proposed sale date of the 6,300 shares, allowing him and his wife to cure the loan default without having to surrender the stock.

“We may not get to that point,” he said. “We’re working on two or three different things now.”

The Biddles have filed for Chapter 11 bankruptcy protection, which is a type of bankruptcy that allows debtors time to work with creditors on reorganizing personal or company debts. The settlement agreement for the stock sale was signed by lawyers representing both Conway National Bank and the Biddles.

Trustees usually are not appointed in Chapter 11 cases. However, Robert Anderson – a Columbia lawyer who serves as a trustee in other bankruptcy cases statewide – said courts usually will approve settlement agreements as long as the terms of the transaction are “commercially reasonable,” a legal term meaning the sale generally follows standard procedures and the price approximates fair-market value.

“The bank is going to want the highest price it can get,” Anderson said.

Gary Loftus, director of the Center for Economic and Community Development at Coastal Carolina University, said he does not believe B&C will allow the stock to be purchased by a company outsider.

“My inclination is that Burroughs & Chapin would buy the stock,” said Loftus, who has been a participant in local business and politics for nearly four decades. “I just don’t see any other scenario.”

Harry McKnight, a retired certified financial planner with the former Wachovia in Myrtle Beach, agrees. McKnight, whose interactions with B&C over the years included stints on the Myrtle Beach Planning Commission and on a group studying redevelopment of the city’s downtown area, said B&C “doesn’t like outsiders to have stock.”

“It dilutes their control of the company,” he said. “Any family business would want to maintain control of its stock.”

McKnight declined to say what he thinks the stock is worth – “It’s hard to put a value on privately held stock,” he said – but added that the $92.89 floor price set by the bank is too low.

The settlement agreement stems from a $950,000 loan the Biddles received from Conway National Bank in 2001, according to court documents. That note was renewed in February 2010 for $900,000 and is secured in part by three B&C stock certificates totaling 6,300 shares. The agreement also calls for the Biddles to file a debt reorganization plan by Feb. 19.

Contact DAVID WREN at 626-0281

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