Jackson Hewitt Tax Service Inc. (“Jackson Hewitt”) and 5 associated debtors (the “Debtors” ) filed voluntary petitions under Chapter 11 of the Bankruptcy Code on May 24, 2011 in the Bankruptcy Court for the District of Delaware (Case No. 11-11587). This initial note provides a brief background of the Debtors based upon information in the Declaration of Daniel P. O’Brien, the Debtor’s Chief Financial Officer, filed in support of the first day pleadings (the “O’Brien Declaration”) and provides the Debtors’ consolidated list of their 30 largest unsecured creditors.

The Debtors

The Debtors are: Jackson Hewitt Tax Service Inc., Jackson Hewitt Inc., Jackson Hewitt Technology Services LLC, Tax Services of America, Inc., Jackson Hewitt Corporate Services Inc., and Hewfant Inc. The Debtors’ business is summarized in the O’Brien Declaration as:

Jackson Hewitt provides computerized preparation services for federal, state and local individual income tax returns in the United States through a nationwide network of franchised and company-owned offices operating under the brand name Jackson Hewitt Tax Service. The market for paid tax preparation services is highly fragmented, with tens of thousands of paid tax return preparers throughout the country. Jackson Hewitt is the second largest paid tax return preparer in the United States, having prepared approximately 2.6 million tax returns for the 2011 tax season, which is between 3% and 4% of the total market for paid tax return preparation services.

Jackson Hewitt’s business consist of both a franchise network of approximately 700 franchisee operating 4,846 offices and tax services provided by Jackson Hewitt through approximately 1,110 company owned offices.

Secured Loans, Unsecured Creditors and Trade Debt

The Debtors explain without equivocation that they sought bankruptcy protection because they could no longer sustain their debt obligations.    The O’Brien Declaration states that as of the Petition Date, the Debtors were obligated on a total of approximately $357 million in loans secured by a first priority lien on substantially all of the Debtors’ assets.

The Debtors estimate that the Company’s total “enterprise value” is between $200 million and $250 million.  Based on this estimate, the O’Brien Declaration concludes that “the lenders have an unsecured deficiency claim of approximately $172 million, which makes them the Debtors’ largest unsecured creditors.”

In terms of trade debt, as of the Petition Date, the Debtors state they were “obligated on a relatively small amount of outstanding trade debt.”  However, as indicated by the list of the Debtors’ largest unsecured creditors, there will be a number of landlords with claims arising due to lease rejections.

The Direction of the Case

Concurrently with the Debtors’ petitions, the Debtors submitted a plan of reorganization and disclosure statement.  Under the plan, the existing equity interests will be extinguished and the former secured lenders will become the sole equity holders in the Debtors.  The O’Brien Declaration goes on to explain that “[t]he Plan also provides that the Debtors will (a) reject certain unfavorable executory contracts and unexpired leases and (b) assume all of their franchise agreements with their franchisees. Holders of general unsecured claims, including the lenders, as holders of deficiency claims under the Credit Agreement, will receive no recovery.”

The Debtors’ Consolidated List of Holders of Largest Unsecured Claims

The Debtors’ have requested authority to file a consolidated list of the holders of the Debtors’ largest unsecured claims in lieu of a separate list for each of the Debtors. The consolidated list is set forth below.

Listed Creditor Name Nature of Claim Status Amount
01 Harper v Jackson Hewitt, Inc.
Brain A. Glasser; John W. Barrett; Eric B. Snyder; and Jonathan R. Marshall
Bailey & Glasser LLP
227 Capitol Street
Charleston, West Virginia 25301
Litigation Contingent, Unliquidated, Disputed
02 Alicia Gomez v. Jackson Hewitt, Inc. Counsel: 

I) Daniel A. Katz
8601 Georgia Avenue, Suite 604
Silver Spring, MA 20910
Nicole T. Fiorelli and Patrick J. Perotti
Dworken & Bernstein Co., L.P.A.
60 South Park Place,
Painesville, OH 44077
Ronald I. Frederick
Ronald Frederick & Associates Co., L.P.A.
55 Public Square, 13th Floor, Suite 1300
Cleveland, OH 44113
John Roddy and Elizabeth Ryan
Roddy Klein & Ryan
727 Atlantic Avenue, 2nd Floor
Boston, MA 02111

Litigation Contingent, Unliquidated, Disputed
03 Fugate v. Jackson Hewitt Inc.

I) Ben S. Braud
The Popham Law Firm
323 West 8th Street, Suite 200 Kansas City, MO 64105
Nicole T. Fiorelli and Patrick J. Perotti
Dworken & Bernstein Co., L.P.A.
60 South Park Place
Painesville, OH 44077
John Roddy
Roddy Klein & Ryan
727 Atlantic Avenue, 2nd Floor
Boston, MA 02111

Litigation Contingent, Unliquidated, Disputed
04 Zimmerman Advertising Inc.
Attn: Kevin Brown
2200 W. Commercial Blvd.
Ft. Lauderdale, FL 33309
Trade $236,358
05 Working Solutions
Attn: Linda Bender
1820 Preston Park Blvd, Suite 2000
Plano, TX 75093
Trade $131,602
06 Fastax Properties of Baltimore
2034 Ashleigh Woods Court
Rockville, MD 20851
Lease Rejection Unliquidated $70,188
07 Champion Solutions Group
Attn: Pam Dixon
791 Park of Commerce Blvd., Suite 200
Boca Raton, FL 33487
Trade $54,789
08 Croucher Family Partnership
7310 Remcon Circle
El Paso, TX 79912
Lease Rejection Unliquidated $53,282
09 Farrruk Sohail
2367 Monte Villa Court
Marietta, GA 30062
Lease Rejection Unliquidated $52,800
10 Blue Diamond Center LLC
11411 Southern Highland Parkway
Las Vegas, CA 89141
Lease Rejection Unliquidated $51,702
11 Developers Diversified Realty Corp.
P.O. Box 534461
Atlanta, GA 30353
Lease Rejection Unliquidated $45,723
12 Simon Mall
7550 Reliable Parkway
Chicago, IL 60686
Lease Rejection Unliquidated $45,129
13 Bloomington Shoppes Devlp
750 Pennsylvania Ave South
Minneapolis, MN 55426.
Lease Rejection Unliquidated $44,745
14 Cooperkatz & Company Inc.
205 Lexington Avenue, 5th Fl.
New York, NY 10016
Trade $43,882
15 Monte Vista Crossings, LLC
1855 Olympic Blvd, Suite 250
Walnut Creek, CA 94596
Lease Rejection Unliquidated $41,094
16 Farm Road Retail LLC
1770 North Buffalo, Suite 101
Las Vegas, NV 89128
Lease Rejection Unliquidated $40,764
17 MCW-RC GA-Lindbergh Crossing LLC
P.O. Box 534249
Atlanta, GA 30353
Lease Rejection Unliquidated $36,393
18 Valley Oaks Plaza
3065 South Jones Blvd.
Las Vegas, NV 89146
Lease Rejection Unliquidated $36,000
19 Crystal Gallery Developer
8085 Wayzata Boulevard, Ste 100 Minneapolis, MN 55426
Lease Rejection Unliquidated $33,649
20 Willmar Shoppes Retail Center, LLC
c/o Mid America, LLC
8985 Wayzata Blvd, Ste 100
Minneapolis, MN 55426
Lease Rejection Unliquidated $33,034
21 Thomas Carso
c/o Consolidated Property Management
810 Silver Spur Road, Ste E
Rolling Hills Estates, CA 90274
Lease Rejection Unliquidated $32,964
22 Yebri Investment Co, LLC
5900 West Sunset Blvd.
Los Angeles, CA 90028
Lease Rejection Unliquidated $32,772
23 Sawyer Shops LL
12975 Shelbyville Road
Louisville, KY 40243C
Lease Rejection Unliquidated $32,760
24 The Mohr Revocable Living Trust
c/o The Lance-Kashian Group
8385 N. Fresno Street
Fresno, CA 93720
Lease Rejection Unliquidated $32,552
25 LaCholla & River Road Associa.
7575 North 16th Street
Phoenix, AZ 85012
Lease Rejection Unliquidated $32,236
26 ZP No. 166, LLC
1 1 1 Princess Street
Wilmington, NC 28401
Lease Rejection Unliquidated $32,186
27 Kimco Income Operating (Embry Village)
3333 New Hyde Park, Ste. 100
New Hyde Park, NY 11042
Lease Rejection Unliquidated $31,944
28 Flat Shoals Parkway LLC
3445 Peachtree Road, #465
Atlanta, GA 30326
Lease Rejection Unliquidated $30,800
29 Dirk Wyatt
4761 East Service Road
Ceres, CA 95307
Lease Rejection Unliquidated $28,644
30 Ben Kim Properties, LLC
210 Interstate North
Circle SE #50
Atlanta, GA 30339
Lease Rejection Unliquidated $28,178

The list does not include: (1) persons who come within the definition of “insider”; or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.

Bankruptcy Rule 1007(d) provides that a debtor shall file “a list containing the name, address and claim of the creditors that hold the 20 largest unsecured claims, excluding insiders.” Fed. R. Bankr. P. 1007(d). In the case of a multi-debtor filing, it is likely that many creditors are shared among certain of the debtors. This is especially the case where the debtors operate as a single business enterprise. Under these circumstances and provided that there is a request for joint administration, it is common for multiple, related debtors to request authority to file a single, consolidated list of their collective largest general unsecured creditors. These requests usually are granted by the bankruptcy court.

The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.