Six major creditors of the Hackett's Hardware chain have agreed to dismiss their petition seeking to force the retailer into chapter 7 bankruptcy.
A federal bankruptcy judge has set a hearing for May 4 on their request.
A statement filed by the creditors with the court on Friday says dismissing the petition is in the best interests of Hackett's, its employees and creditors.
Unless the petition is dismissed, Hackett's will be deemed in default of its credit agreement, forcing the company to wind down operations, the statement says.
Hackett's officials told the creditors group that a number of prospective investors and lenders will not provide financing if the company is in bankruptcy.
If the petition is dismissed, Hackett's expects to pay its secured lender in full by the end of june and obtain replacement financing through another lender or investor by that time, according to the statement filed with the court.
"While there is no assurance that the Company will successfully restructure its operations outside of bankruptcy, the Petitioning Creditors are convinced that given the concessions they were able to extract under the Agreement... they are prepared to see if the Company can reorganize its debts," the statement says.
The petitioning creditors collectively hold about $1.5 million of Hackett's $3.2 million in trade debt, or 46 percent, the statement says.
An agreement between the petitioners and Hackett's calls for:
- Hackett's granting a trustee a lien on substantially all of the company's asset's for the benefit of all trade creditors with an unpaid balance
- Recognition of the petitioning creditors as an ad hoc committee
- Payment of the petitioning creditor's attorney fees
- Requiring Hackett's to start negotiations to pay off its debts to the creditors about the same time it pays off its line of credit
- Hackett's to provide the Ad Hoc committee with weekly and monthly financial reports.
