A longtime Island business is closed, and on Tuesday, Oct. 22, the merchandise inside, as well as some heavy equipment, is being auctioned off to pay nearly $5 million to debtors.
Bankruptcy records show Hinckley’s Hardware owes more than $1 million to vendors, $1.4 million to the state Department of Revenue, and $2.5 million to the Internal Revenue Service. The IRS and DOR will have to be paid first out of the proceeds from an upcoming bankruptcy auction, Donald Lassman, an attorney and trustee, told The Times. “There’s a mountain of debt,” he said.
In a lengthy statement sent to The Times, Wayne Guyther, owner of Hinckley’s, explains the decline of the family-owned business. “There were certainly a lot of mistakes made along the way, and I want to make it clear that I take complete responsibility for what happened to the business,” Guyther wrote.
Guyther and his brother, Nelson, built the company from a small mom-and-pop into a $15 million-per-year business with more than 50 employees at its peak. Wayne Guyther wrote that the death of his brother, the president of the company, in 2014 to stage 4 melanoma came at the height of the financial difficulties. “The loss of Nelson’s hard work and counsel was another significant blow to the business, and, of course, took its toll on the remaining shareholders,” he wrote.
Among the issues that dealt a blow to the business was the economic downturn of 2008, which showed a drop in sales of 16.5 percent, a failure to collect on accounts receivables from customers in the hundreds of thousands, and taking on too much debt.
“The company’s largest building materials supplier, a cooperative buying group, was extending the company a line of credit that exceeded $1 million into 2013, even though the company’s ‘official’ credit limit was only $200,000,” Guyther wrote.
That year the company started enforcing credit limits, and a significant amount of working capital went to pay down that debt, Guyther wrote. “This further drastically inhibited the company’s ability to maintain adequate inventory levels, which resulted in additional sales declines in operating losses.”
Meanwhile, Martha’s Vineyard Bank accelerated loan payments and, even though $4 million in property had been put up as collateral, the bank was unwilling to wait for a sale/lease back deal to be worked out, Guyther wrote. In February 2018, facing foreclosure from the bank, Hinckley’s filed for Chapter 11 bankruptcy protection. “It was not the company’s first choice to file Chapter 11 bankruptcy, but the company feared that in a foreclosure sale in February on Martha’s Vineyard, the property would have ended up selling for far less than fair value, maybe even $1 million less, which would have resulted in significantly less money being available to pay the company’s creditors,” Guyther wrote.
In August 2018, the 1.1-acre property where Hinckley’s is located at 61 Beach was sold to a developer for $2.3 million. The developer is looking to build a Chapter 40B mixed-use development that’s getting some pushback from the town.
Robert Sawyer, who has acted as a spokesman for the development group, said Hinckley’s leased the property after the sale. “We lost a tenant,” he said. “I feel terrible for them.”
Guyther said the bank was paid, but the taxes owed “accrued significant interest and penalties,” some more than two times the original taxes. He tried to work out a deal to make a lump-sum payment for the taxes owed and come up with a monthly payment plan. “It was the company’s belief that this was the best option for everyone involved, but the IRS rejected the plan, and the case was converted to Chapter 7 on August 28th,” he wrote.
Signs on the outside of Hinckley’s Hardware announce the auction, and the doors of the building are locked. Inside, the shelves are still stocked, and a half-filled water bottle is visible on the counter.
Lassman said the store closed for good on August 28 when it went from being a Chapter 11 bankruptcy reorganization to a Chapter 7 liquidation.
Paul Saperstein Co. is running the auction, beginning at 11 am at the store and online. Bidders will be able to purchase everything from cans of paint to Andersen windows and doors to forklifts, according to the list on Saperstein’s website. A complete inventory is coming soon, according to the site.