MYRTLE BEACH — Burroughs & Chapin Co. Inc. wants to buy 6,300 shares of its company stock directly from former board member Larry Biddle – who is in the midst of a Chapter 11 bankruptcy reorganization – rather than take a chance of losing the stock to a company outsider during a planned auction to be held by Biddle creditor Conway National Bank, according to documents filed Friday in federal bankruptcy court in Charleston.
Biddle has asked the court for permission to sell the shares to B&C for $157.85 apiece, with the proceeds being used to pay off an $857,584 loan Biddle received in 2010 from Conway National Bank. Biddle gave the bank a security interest in the 6,300 shares as collateral for the loan when he received it. Biddle filed for bankruptcy protection after defaulting on the loan, and the bank recently received approval to sell the B&C stock to help pay off the debt.
Conway National Bank plans to sell the stock to the highest bidder during an auction starting at 10 a.m. April 16. The bank will start the bidding at $92.89 per share – the most current book value of the stock. Jennings Duncan, the bank’s president, could not be reached for comment.
Biddle could not be reached for comment. B&C spokeswoman Lei Gainer declined to comment on the matter, saying the privately held company “doesn’t give out specific information concerning its stock.”
Biddle, in Friday’s court filing, said he is concerned that the auction price won’t reflect the true value of the stock and might not bring enough cash to fully pay off the loan. He said a direct sale to B&C would be more beneficial than an auction because it would assure full payment to the bank.
Biddle’s filing does not take into account the possibility that an open-market auction might bring in more cash than B&C’s direct-sale offer, providing money to pay off other creditors. B&C would be allowed to bid on the shares during the public auction.
This is the second time B&C has attempted to make an end run around the bankruptcy court’s order allowing Conway National Bank to sell the stock at auction. The company last month asked the court to extend the deadline for objections to the auction so it could determine whether it could legally block the sale. B&C ultimately determined that it had no legal standing to interfere in the bankruptcy proceedings, choosing instead to propose the direct sale.
The bankruptcy court is under no obligation to accept Biddle’s latest request and a hearing date on the matter has not been scheduled. Biddle has asked the court for an expedited hearing no later than April 8 because his proposed contract with B&C calls for an April 10 closing.
Biddle, in a January settlement agreement with Conway National Bank, initially proposed letting the bank auction the stock. However, Biddle told The Sun News at the time that he hoped an alternative solution could be reached.
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. 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.
Most of the company’s stock is owned by family members of the company’s founders, and the company previously has taken steps to restrict its sale to so-called outsiders. Biddle’s wife, Virginia, is part of the Burroughs family and Larry Biddle formerly served on the company’s board of directors. Virginia Biddle is named as a co-debtor in the bankruptcy.
The Biddles own 19,104 shares of B&C stock, according to court documents. In addition to the shares scheduled to be auctioned, B&C has proposed purchasing enough shares from the Biddles to pay off their unsecured creditors.
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.
Contact DAVID WREN at 626-0281.
