SQRL expected to switch course on bankruptcy filing

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Dive Brief:

SQRL Service Stations LLC — not SQRL Holdings — is expected to file for voluntary Chapter 11 bankruptcy in the coming weeks, Sidney Scheinberg, an attorney from the law firm Godwin Bowman, representing Gas Hub LLC, said in an interview.
On July 15, Scheinberg and SQRL Holdings’ attorney, Clinton Lancaster, filed a joint motion to dismiss the involuntary Chapter 7 case that Gas Hub opened against SQRL Holdings back in May. After SQRL Holdings’ failed to participate, the attorneys agreed last week to open a new case that will see SQRL Service Stations of Florida — which Gas Hub acquired in April — voluntary file for Chapter 11.
A hearing is scheduled in Little Rock, Arkansas, on July 29 for Judge Bianca Rucker to approve the dismissal motion and for the new case to open, which Scheinberg believes “will definitely happen.”

Dive Insight:

Despite the change in approach to the company’s bankruptcy proceedings, there is still continuing confusion over ownership of SQRL’s assets, Scheinberg said.

According to the promissory note made between SQRL founder Blake Smith and Gas Hub CEO Jamal Hizam back in April, the $17 million sale was for the assets of “SQRL Service Stations LLC, a Florida limited liability company.”

Scheinberg said he and Gas Hub later discovered that there is also a SQRL Service Stations LLC of Arkansas that was not included in the deal.

However, Smith claims that Hizam and Gas Hub acquired all of SQRL’s assets. In a June interview, he said Hizam “was supposed to buy the entire kit and caboodle,” stated that he sold both SQRL Holdings and SQRL Service Stations.

The promissory note — which C-Store Dive obtained a copy of — says that SQRL Holdings sold SQRL Service Stations of Florida to Gas Hub. It doesn’t mention SQRL Service Stations of Arkansas or any other entity.

Meanwhile, Lancaster — Smith’s attorney — is supporting the new Chapter 11 case for SQRL Service Stations of Florida to prevent SQRL Holdings from filing for bankruptcy, Scheinberg said.

Lancaster did not respond by press time to comment on the situation.

“I’ve never been able to figure out what’s owned by SQRL Service Stations and what’s owned by SQRL Holdings. I don’t know … if anybody can,” Scheinberg said.

By opening a new Chapter 11 case for SQRL Service Stations of Florida, Hizam and Gas Hub will try to “salvage as much of the deal as possible,” Scheinberg said.

He also noted that this is an attempt to recoup funds before they approach many of the c-stores’ landlords — including Blue Owl Capital — most of whom have terminated their leases.

“(We’re hoping to) make deals with the landlords either to purchase some of these stores or to operate the stores under a new lease agreement,” he said.