Shareholders of Dallas-based bankrupt retailer Tuesday Morning may be in the money – The Dallas Morning News

Shareholders of Dallas-based Tuesday Morning Corp. may be in the rare situation of owning some of the retailer after its expected exit from bankruptcy this fall.

Tuesday Morning, a retailer of gifts and home closeouts founded in 1974, filed for bankruptcy May 27 after all of its 700 stores were closed by the pandemic and it had no e-commerce business to make up any of the lost revenue.

U.S. Bankruptcy Court Judge Harlin DeWayne Hale on Friday approved the creation of a committee of equity security holders after denying the request twice before.

The Dallas judge said in his order that he now has greater confidence that there is a substantial likelihood that equity will receive a meaningful distribution."

Tuesday Morning stores have performed well since reopening, along with other retailers that sell home furnishings as Americans reacted to the pandemic by sprucing up their homes. Plus, the retailer has attracted 40 prospective buyers who have signed nondisclosure agreements to access confidential information. Several parties have signed nonbinding letters of intent, according to the judges order.

The judge previously said he would reconsider forming an equity committee if events changed the analysis. Theres little precedent for shareholders of public companies to come out with anything from a Chapter 11 reorganization. Thats because theres a strict hierarchy for who gets paid from the assets. Government taxes, lenders and other creditors, including utilities and merchandise suppliers, bondholders and preferred shareholders, are all paid ahead of common stockholders.

Tuesday Mornings stock price stopped trading on the Nasdaq at 28 cents a share on June 5 and has since been trading on the over-the-counter market, often called the pink sheets. The stock closed Friday at 63 cents a share, up 18 cents, or 40%.

Tuesday Morning said it will file bid procedures by Wednesday and anticipates a final sale hearing at the end of October. Next week, it said, it will also file a plan and disclosure statement to serve as an alternative to the sale process.

Hale said given how quickly Tuesday Morning is moving on the sale process, he believed that it was necessary to appoint an equity committee at this time to ensure that equity holders are able to participate meaningfully in the sale and plan processes in a streamlined and efficient way.

Unlike many retailer companies that were forced into bankruptcy because of debt, Tuesday Morning didnt have a problematic balance sheet. It lacked cash flow with stores closed, and because of uncertainty related to the pandemic, the bank wouldnt extend credit to the company.

As part of its reorganization, Tuesday Morning closed 132 stores through the end of July and 65 additional stores that started closing in August. It also closed a new distribution center in Phoenix. It was already in the process of retrofitting its 1.2 million-square-foot Dallas distribution center.

Twitter: @MariaHalkias

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Shareholders of Dallas-based bankrupt retailer Tuesday Morning may be in the money - The Dallas Morning News