Gottschalks Bankruptcy Adds Up

A Delaware Bankruptcy court is still working with Gottschalks' creditors as they are waiting to see if they will be able to receive any of the money owed to them since Gottschalks entered bankruptcy on January 14, 2009, as reported by the Fresno Bee.

Two years ago, at the time the bankruptcy was filed, Gottschalks was running almost 60 stores in the western U.S.  By July of 2009, with the last store closing, almost all of their 5,200 employees were forced to seek new positions elsewhere - some of which were employed at their Fresno-based corporate headquarters.

Joe Levy, one of founder Emil Gottschalks' grand nephews said of the layoffs, "I think of all those loyal people, the associates we had who lost their jobs, and how they're coming along.  That's probably my biggest thought, because this disrupted their lives terribly."

Levy was also Gottschalks' CEO and chairman; but he retired eight years ago, six years before the bankruptcy.

Levy continued, "Some of them have found jobs, and unfortunately, some haven't.  Some of the older folks retired because they decided they didn't want to pound the pavement anymore.  It's not easy finding work."

Gottschalks' closing left huge gaps in several malls: Clovis's Sierra Vista Mall, Fresno's Shops at River Park, Fashion Fair Mall and Manchester Center, Hanford Mall and Visalia Mall.  Macys' has taken over two spaces and Forever 21 took over two others.

Other malls are left with empty buildings.

The managing partner of Sierra Vista Mall owner LandValue Management, Jim Huelskamp, said, "We lost an anchor tenant, which is never good for a shopping center because it creates less traffic for the other stores, and the lease contract was voided, so they didn't make good on the lease commitment and we lost that lease income."

Beyond employees losing their jobs and empty buildings causing a loss of revenue for others, Gottschalks' also has thousands of creditors owed millions of dollars.

The creditors, hoping for pennies per dollar owed, are still waiting for a federal bankruptcy judge to approve the bankruptcy plan before any left over cash, or assets, can be divided.

When Gottschalks submitted its bankruptcy plan a little over a year ago, they estimated that their unsecured creditors may be paid between $4 million and $10 million.  That sum is figured after higher-priority secured claims and bankruptcy costs are settled.

The bankruptcy expenses include attorneys, consultants, accountants, among others, that are still adding to the sum as the months add up as well.  Professional fees and expenses, that Gottschalks had to tally up for the court in November, totaled more than $15.5 million.

Unsecured claims pending against Gottschalks currently total approximately $71 million.

Levy has gone on and formed his new company, Gottschalk by Joe Levy, with former Gottschalks' executives.  Their hope is to brand themselves with a smaller chain of department stores.

The first three Gottschalk by Joe Levy stores have been announced in three mall spaces formerly held by Gottschalks': Clovis, Auburn and Carson City, Nevada.

Levy said that his new company is "looking forward to the first half of 2011."

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