An auction for bankrupt Seattle based Tully’s Coffee is heating up. Tully’s sells coffee to consumers out of 47 retail locations in airports, downtown Seattle street corners and the Washington State Convention Center. Under the wieght of its corporate structure, Tully’s filed for Chapter 11 bankruptcy protection in October, promptly shutting down several stores. Soon after, the coffee seller began soliciting bids for purchase of the assets valued at $4.3 million.
Amongst the prominent bidders have been Patrick Dempsey, well known as “Dr. McDreamy” for his role in the TV hit series “Grey’s Anatomy”. Dempsey found himself competing against Barista’s coffee chain, known as the Hooters of the coffee world.
Coffee at the Baristas chain’s 11 locations throughout five states are served up by youngish, busty and barely clothed co-eds who are required to submit a photo with their job application and state how they feel about the Baristas uniform.
The final prominent bidder was coffee giant Starbucks, who only wanted half of the retail locations, so effectively took itself out of competition for the assets.
Baristas valued its bid at $10.4 million, though parts of that bid did not comply with the Bankruptcy Code becauses the proposal would pay some money to shareholders while shorting creditors who are supposed to be paid in full first.
Reports have been published that Dempsey has been the winner of the auction, that was not publicly held. As a result, the amount of the winning bid has not been reported.
Although public auctions are the norm in bankruptcy courts, many sales are conducted based upon sealed bids and apparently this was the case for the Tully’s auction. A sealed bid auction requires a number of steps to become consummated: the trustee (or in a chapter 11 case, the debtor’s own management) must first seek approval of proposed bidding procedures. Once these procedures are approved, a marketing process occurs during which time the sealed bids are received. Trustees then often conduct a second round of bidding amongst the buyers who submitted the first round of offers. Once the trustee picks the highest and best offer, the bankruptcy court holds another hearing to consider the winning bid and enter an order ratifying the sale. After ratification, the parties have some period of time to conduct a settlement so that the buyer can put together the financing to close the deal.
