Ultimate Electronics was in “worse financial shape than what anyone thought, including myself,’ chief executive Mark Wattles said Wednesday after buying 32 stores nationwide, including 11 stores in Colorado that will continue to operate under the SoundTrack name.
Wattles’ $47.1 million bid at auction was the final move to save the bankrupt Thornton- based electronics retailer.
The 32 better-performing stores, employing 2,500 people, will be part of a new entity, Ultimate Acquisition Partners LP. Wattles is chairman and CEO. Residing in Las Vegas, he has been commuting to Colorado.
“About six to eight weeks ago, I came to the conclusion that the best alternative was to reduce the (number) of stores,’ Wattles said. “The business was losing a lot of money and was in worse shape than what anyone – the banks, shareholders and previous management team – thought, including myself back in December.’
Thirty stores nationwide will be closed and liquidated. As previously announced, 900 employees will lose their jobs.
On Tuesday, a U.S. Bankruptcy Court judge agreed to Wattles’ plan to purchase the stores for $43.6 million in cash and $3.5 million in a note yielding interest of 7 percent. Wattles will also take over leases for the stores, including those of the corporate headquarters in Thornton and a neighboring SoundTrack store.
Wattles said he would broaden inventory and build relationships with customers.
“We just made the decision (Tuesday) that we would start buying additional inventory. That’s what our customers want – as big of a selection as possible,’ Wattles said. “Our objectives are very long-term. We’re not looking for short term gains, just one elated customer at a time.’
Ultimate’s vendors and creditors – including Wells Fargo, its leading lender – were in favor of the liquidation and Wattles’ bid. Wattles said that all parties negotiated and voted on the deal long before last week’s auctions.
Wattles originally purchased 1.47 million shares of Ultimate in December, gaining a 10 percent stake in the company. In addition, he tried to save the electronics retailer by purchasing an additional 6.85 million shares for $4.4 million and committing $5.6 million in debtor-in-possession financing.
However, management’s projections that the 62-store chain could come out of bankruptcy unscathed were “too optimistic,’ he said.
Ultimate filed for Chapter 11 bankruptcy in January.
The problem with the chain was that it grew too quickly, Wattles said. With the liquidation of about half of its stores, Ultimate will become the size it was several years ago before its wild growth spurt.
Wattles is a former CEO of the Hollywood Video chain.
Staff writer Kimberly S. Johnson can be reached at 303-820-1088 or kjohnson@denverpost.com.
