Dive Brief:
- SQRL Service Stations LLC has filed for Chapter 11 bankruptcy protection, according to filings with the U.S. Bankruptcy Court for the Northern District of Texas.
- The bankruptcy has been initiated by Gas Hub LLC — the investment company that acquired SQRL Service Stations earlier this year — and its owner, Jamal Hizam. The company’s bankruptcy petition and list of creditors shows that it owes over $1.2 billion worth of unsecured claims. Most of that debt is money owed to Blue Owl Capital, the investment firm that once owned the leases to hundreds of SQRL convenience stores.
- SQRL Service Stations’ Chapter 11 filing comes as no surprise. Attorneys representing Gas Hub were anticipating this step as of late July as the retailer reversed course on an attempt to force SQRL Holdings and its founder Blake Smith into Chapter 7 bankruptcy.
Dive Insight:
Earlier this summer, Gas Hub — which acquired SQRL Service Stations of Florida for $17 million in April — filed an involuntary bankruptcy petition against SQRL Holdings and Smith in an effort to recoup millions in unpaid rent. Little traction had been made as of last month, with confusion arising time and time again over the assets that were actually sold back in April.
In late July, attorneys from both sides filed a joint motion to dismiss the involuntary Chapter 7 case and open a new one that would see SQRL Service Stations of Florida voluntarily file for Chapter 11. That new case is now open, although the bankruptcy judge denied the motion to dismiss the involuntary case against Smith, according to court filings and Sidney Scheinberg, an attorney from the law firm Godwin Bowman, representing Gas Hub LLC.
Smith is uninvolved in the new Chapter 11 filing, Scheinberg noted in an interview on Tuesday.
By filing for Chapter 11, Gas Hub is intent on doing what it can to get the remaining SQRL convenience stores back up and running after most of these stores have shuttered in tumultuous fashion, Scheinberg said.
Scheinberg reiterated that Gas Hub only acquired SQRL Service Stations LLC back in April and not the entire SQRL Holdings entity. Smith has countered this, saying in a previous interview that Hizam “was supposed to buy the entire kit and caboodle.”
“We’re trying to protect the assets and leases of that business and reorganize it … if possible,” Scheinberg said on Tuesday of SQRL Service Stations.
When asked on Tuesday how many convenience stores Gas Hub actually has to its name, the attorney said he and Hizam are “going through the list right now to figure that out.”
When pressed for a rough estimate of locations, Scheinberg said “it’s not that many.”
Blue Owl, which claims the lion’s share of SQRL Service Stations’ debt, has terminated its leases with SQRL Stores over the past several months and is in the midst of a lawsuit with Gas Hub over unpaid rent.
Scheinberg also said that prior to Gas Hub acquiring SQRL Service Stations, Blue Owl gave Smith and SQRL Holdings an undisclosed amount of money to make improvements to the convenience stores, which seemingly never happened.
“I’m not certain what happened to that money,” Scheinberg said.
Correction: A previous version of this story misstated a transaction made between SQRL and Blue Owl to fund store improvements.
