Could a Scooter Store buyer be waiting in the wings?

Wednesday, July 3, 2013

NEW BRAUNFELS, Texas – Stalking horse bidder protection and breakup fees were two of the details finalized during a June 24 hearing for The Scooter Store’s Chapter 11 auction. 

The fact that The Scooter Store requested a specific breakup fee—2.5% of the purchase price plus $500,000—means the company is likely in negotiations with at least one potential buyer, says bankruptcy attorney Joe Marshall. 

“Sometimes, a buyer won’t agree to step into the stalking horse position until they know what protections will be approved by the court,” said Marshall, a partner in the Restructuring Group at Munsch Hardt in Dallas. 

As part of the hearing, U.S. Bankruptcy Judge Peter J. Walsh also set the auction date for Aug. 6, with a closing by Aug. 13. Those dates are a couple of weeks later than The Scooter Store requested, but Marshall says that’s likely due to scheduling conflicts, rather than any concerns on the court’s part.

With auction procedures and dates in place, speculation remains about who a potential buyer might be. Analyst Don Davis suspects any purchase would come from an investor, rather than another HME provider.

“I assume it’ll be a private equity firm, one that will bid so low that they can still make money,” said Davis, a financial consultant with Duckridge Advisors. 

The danger there, sources say, is that The Scooter Store won’t earn enough through asset sales to pay off its debts—nearly $59 million, according to the bankruptcy filing. The company may have to take more drastic steps if that happens. 

“They may have to look at liquidation,” said Davis. “But if they figure out the liquidated value, and the auction brings more than that, they’ll be happy.”

Analyst Bob Leonard has no idea who a potential buyer might be.

“They’re tarnished goods,” said Leonard, an analyst with The Braff Group. “Some of their inventory might have value, but I don’t think the name has a lot of value, and the business model is flawed.”

Neither The Scooter Store nor Sun Capital Partners, a senior secure lender, responded to requests for comment by deadline.