Dive Brief:
- Two months after SQRL Service Stations was sold amid several lawsuits and controversies, it’s unclear if buyer Gas Hub LLC is in fact the rightful owner of all the locations, according to a June 11 filing in the U.S. Bankruptcy Court for the Eastern District of Arkansas.
- In April, Gas Hub said it acquired the leases for all of SQRL Holdings’ 300-plus c-stores. However, that now “appears to be untrue,” as SQRL Holdings continues to utilize the LLC for SQRL Service Stations that Gas Hub thought it owned, the filing notes.
- Gas Hub currently owns the leases to some of these c-stores, Sidney Scheinberg, an attorney from the law firm Godwin Bowman, representing Gas Hub, said in an interview. “But it's just a total mess, and we can't figure out who owns what,” he added.
Dive Insight:
When asked how many SQRL Service Stations Gas Hub currently operates, Scheinberg said he didn’t want to speculate. Jamal Hizam, CEO of Gas Hub, declined to comment when asked this same question.
“We’re operating in some of their locations,” Scheinberg said. “We thought we acquired everything… but this is such a quagmire, I’m not sure what we got.”
Blake Smith, SQRL’s founder and former CEO, refuted the idea that Gas Hub doesn’t own all of these locations. He said that in April, he sold not only all SQRL Service Stations to Gas Hub, but all of the retailer’s assets, which also included the parent company, SQRL Holdings.
“The intention was that they were supposed to have all of the gas stations,” Smith said in an interview. “Never was there any fleecing or hiding the ball… [Hizam] was supposed to buy the entire kit and caboodle.”
Last month, Gas Hub and several other creditors began efforts to force SQRL into Chapter 7 bankruptcy due to “breach of membership unit purchase agreement.” Over the past several months, SQRL’s landlords and vendors have begun terminating leases and contracts, claiming the c-store retailer — well before the deal with Gas Hub — wasn’t paying its rent and bills.
Scheinberg previously said that when Gas Hub made the deal, it was under the impression that all payments were up to date. He clarified this week that part of this involuntary bankruptcy case is to get SQRL to cover those bills, which have currently been shifted to Gas Hub and Hizam.
However, Smith claims that Hizam and Gas Hub were informed of SQRL’s debts in the purchase agreement when the deal for the c-stores was made back in April.
“Nobody stuck a gun to anybody’s head,” Smith said. “It was freely signed, looked over by attorneys on both sides, and they knew of all the debts.”
As of this week, SQRL is refusing to file for bankruptcy, Scheinberg said, and as laid out in the filings. He noted that SQRL’s leadership — specifically Smith and executive Adam Lusthaus — denies that they’re in debt or haven’t been paying bills.
“I just don’t understand how they’re denying that they’re broke… I think the evidence is overwhelming that they are,” Scheinberg said.
Smith said that he has “nothing to file” when it comes to bankruptcy, since he sold all of SQRL’s assets to Hizam and Gas Hub. The responsibility for those debts is Gas Hub’s, he added.
A non-jury trial has been called for July 18 to decide whether or not Smith and SQRL must file for bankruptcy, Scheinberg said. He noted that the court anticipates this will take two days.
