YOUNGSTOWN Phar-Mor bankruptcy case drags on

Phar-Mor's bankruptcy case will take months, or even years, to resolve.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- Phar-Mor's stores closed eight months ago, but its bankruptcy lives on.
The case in bankruptcy court in Youngstown could take months, or even years, as creditors battle for the last bit of cash.
"Sometimes it takes years. Sometimes it takes months," said Brett Miller, a lawyer for the unsecured creditors committee. "It's too early to tell."
Creditors want their fair shares of the $59 million that was left after the failed drugstore chain sold its assets and paid its four lenders $120 million.
Creditors received their first payment last month, which was 7 percent of what they were owed. Further payments depend on the outcome of disputed claims and a litigation between Phar-Mor and McKesson Drug Co.
Michael Gallo, a lawyer for Phar-Mor, said he expects hearings on claims to be wrapped up within four months. Companies unsatisfied with rulings could file appeals, however, and it would be impossible to predict how long those would take, he said.
Gallo said the most significant issue is the dispute between Phar-Mor and McKesson.
Wants $21 million
The drug supplier says it is owed $21 million, including $8 million for a reclamation claim. This type of claim covers goods sent to a bankrupt company within 10 days of its filing for bankruptcy. It hasn't been decided whether these claims will receive priority over other unsecured claims.
The litigation between Phar-Mor and McKesson concerns whether McKesson breached a supply agreement. The case is pe2nding in bankruptcy court.
Gallo said creditors will receive more money once these matters are resolved.
"They definitely will get more. The question is how much more," he said.
Phar-Mor has estimated that creditors will receive a total of 17 percent or 18 percent of the $180 million in claims they filed.
Miller said creditors hope to receive future payments of at least 10 cents on the dollar.
One of Phar-Mor's unresolved issues is what will happen to the Phar-Mor Centre downtown. The building is owned by Strouss Building Associates, which is owned by Phar-Mor and a subsidiary of Phar-Mor.
Interest in building
Gallo said several groups have expressed interest in buying the building but no deal has been closed. One of the groups is CRE Holding Corp., which is owned by developers Rokki Rogan and Michael Camacci. It has looked at the building as a potential office building with apartments or condominiums.
Gallo said he doesn't think the sale will provide any value to the estate because the sale price is expected to be less than the liens that have been placed on the building by the state and private lenders.
Phar-Mor had about 200 employees in the building when it ceased operations but had 1,500 employees there in the early 1990s.
shilling@vindy.com