A bankruptcy court judge reviews
Tully’s decision to sell its stores to an investment group led by actor Patrick
Dempsey.
By Melissa Allison
January 11, 2013
A
group of investors led by actor Patrick Dempsey can buy Tully's Coffee out of
bankruptcy, a federal judge said Friday.
The
decision came after Dempsey's group, coffee giant Starbucks and other bidders
sparred before U.S. Bankruptcy Court Judge Karen Overstreet for the 47-shop
chain.
"We
have a lot to accomplish over the next few months and years and I am excited to
now call Seattle my second home," Dempsey said in an emailed statement.
The
deal is expected to close by Jan. 26.
Bidders
in court Friday had participated in a private auction for beleaguered Tully's
last week, when the chain's management and creditors chose the Dempsey group's
$9.15 million bid. Starbucks and a Filipino company called AgriNurture cried
foul, saying their combined bids of $10.56 million should have been selected.
The
judge sided with Dempsey's group. While other bidders may feel the result to be
unfair, she said, "It is what it is, and we do the best we can."
Tully's
CEO Scott Pearson said he's glad the judge supported their choice.
"The
important thing is that we got to the end of this process before we had to do
something that may have been tragic to Tully's brand, shops and
employees," Pearson said.
Although
Dempsey, best known as "McDreamy" from TV's "Grey's
Anatomy," which is set in a fictional Seattle hospital, was on a set and
not in court Friday, the hearing had plenty of drama.
Two
lawyers likened the losing bidders' complaints to Monday-morning
quarterbacking. Another called it whining.
Last
week's auction was compared to the TV show "Survivor," and Judge
Overstreet agreed that it was "not your typical Chapter 11."
Larry
Ream, an attorney who spoke for the committee of unsecured creditors, reminded
the judge that "the patient is dying."
In
making her ruling, Overstreet noted that Tully's has been operating "from
interim operating agreement to interim operating agreement" since it filed
for bankruptcy protection in October. The most recent financing, the judge
said, would run out this month.
In
contesting the selection of Dempsey's group, Starbucks and AgriNurture argued
that their bids were not chosen because of concerns about whether Green Mountain
Coffee Roasters, which owns Tully's naming rights, would work with AgriNurture
if it bought only some Tully's shops.
Starbucks
wanted 25 Tully's sites, which generate about 70 percent of its sales,
including 12 Boeing sites. AgriNurture bid for the rest of the shops.
Green
Mountain, which does business with Starbucks, subsequently said that it would
work with AgriNurture or Dempsey's group.
However,
other factors played into the selection of Dempsey's group: It promised to
retain Tully's about 480 employees, whereas Starbucks promised only to consider
their applications.
Dempsey's
investors also agreed to assume Tully's prepaid coffee-card obligations,
whereas Starbucks would not, even for the Boeing sites. Boeing has a
payroll-deduction program for Tully's cards, and about 40 percent of card
activity occurs at those shops.
Although
a lawyer for Starbucks said it would look after customers, the unsecured
creditors' Ream said Starbucks "could give them a $100 card, and they
could still file a complaint against this estate."
After
Friday's ruling, Starbucks spokesman Jim Olson said, "We respect Judge
Overstreet's decision and appreciate the time she spent hearing our point of
view."
With
the Dempsey deal, creditors are repaid with interest, and employees and leases
are kept. Even some shareholders might receive money, which in bankruptcy cases
is rare.
Overstreet
went a step further in her comments: "Was it (the auction) complicated?
Yes. Did it produce a fantastic result in this case? Yes, it did."
She
explained in detail why she found the auction to be fair, saying it is not her
job to second guess Tully's and its creditors' decision, but to make sure they
followed correct procedures.
But
to founder Tom O'Keefe's filing, which requested that the auction be reopened,
she said such a move might make sense for a shareholder like him to get more
money: "So why not roll the dice? Mr. O'Keefe does not stand to lose his
job."
But
hundreds of employees could have if the process took too long and Tully's could
not stay open.
"I
cannot gamble a sure result," Overstreet said.
O'Keefe
said in a tweet after the hearing Friday: "The judge did a thoughtful job.
Gave it all for the shareholders & I'm at peace! Congrats Patrick!"
---
Melissa Allison:
206-464-3312 or mallison@seattletimes.com. On Twitter
@AllisonSeattleRelated:
Judge approves Patrick Dempsey's bid
to buy Seattle coffee chain Tully's
The 'Grey's Anatomy' actor outbid Starbucks to buy the
smaller chain's 47 shops across Washington and California. Starbucks and its
bidding partner had filed an objection over Dempsey's earlier victory at a
bankruptcy auction.
By
Tracy Miller
January
14, 2013
It's official - McDreamy is Seattle's newest coffee king.
A federal judge on Friday approved actor Patrick Dempsey's
bid to buy the regional coffee chain Tully's, over another bid made by coffee
behemoth Starbucks.
The "Grey's Anatomy" star won a bankruptcy auction
earlier this month, but AgriNurture Inc., which had teamed up with Starbucks
for a combined bid of $10.6 million, filed an objection. Dempsey's company,
Global Baristas LLC, put in a bid for $9.2 million.
Judge Karen Overstreet ruled that the initial auction was
fair and no mistakes had been made.
Dempsey said he was "thrilled that we prevailed."
"I've been deeply humbled by the outpouring of support
from the city of Seattle and am very proud to be a new business owner in this
amazing city," he said in a statement. "We have a lot to accomplish
over the next few months and years, and I am excited to now call Seattle my
second home."
Tully's founder Tom "Tully" O'Keefe said the move
means current Tully's baristas and other employees will be keeping their jobs.
The parent company, TC Global, filed for Chapter 11 bankruptcy protection in
October.
Starbucks had planned to turn half of the 47 Tully's stores into Starbucks, while the other half would have kept the Tully's name.
Dempsey celebrated on Twitter after first winning the bankruptcy auction earlier this
month, saying, "We met the green monster, looked her in the eye, and...SHE
BLINKED! We got it! Thank you Seattle!"