Pay 'N Pak Gets Picked Apart

KENT

Surveying the jumbled yard sale that was once a thriving Pay 'N Pak store here, John Markley cannot resist a bit of gallows humor.

"It's a good time to get Christmas trees," says the failed chain's chief executive.

The plastic trees sit among a collection of what's left after a two-month liquidation sale: bags of door-stoppers, boxes of security flood lamps and a chipped bath tub. In the sale's final day, tomorrow, items at all the chain's remaining 68 stores can be had at 80 to 90 percent discounts.

Or you can wait for the auctions.

The business of closing down Pay 'N Pak is on target, but far from over. There's still inventory, real estate, store fixtures and office furniture to get rid of.

Pay 'N Pak must be out of the stores, and the floors swept clean by Sept. 30. Corporate offices will close in November.

The bank group which made secured loans to Pay 'N Pak will get between $68 million and $73 million from the sale, the amount the company expected to raise when it filed its liquidation plan in June. Buried under a mound of high-interest debt and caught in an increasingly competitive market, Pay 'N Pak did not survive Chapter 11 Bankruptcy, which it had been operating under since last September.

Markley, who has been with Pay 'N Pak since 1989, is not bitter about the company's failure. Rather, he is saddened by it.

"There isn't anything satisfying about watching an organization come apart," he says.

Indeed, the scene is a sad one. At the Pay 'N Pak headquarters, located in a mall built for the company, corporate staff has been reduced to 70. In two weeks, there will be half that many, mainly accountants closing out the company's books.

The mall's arcade, once filled with potted plants and people eating lunch, is now storage for pallets stacked with boxes of Pay 'N Pak's company records. Pay 'N Pak has been trying to lease the mall for its owner, but has not found any takers.

It has gone that way for the company's owned and leased real estate. Some has been easy to unload, like the warehouse in Kent, the object of a bidding war between Ernst and Eagle Hardware and Garden a couple weeks ago. Ernst won the bidding and picked up the warehouse for $600,000, far less than it would have cost the company to build a new one.

Other offers for stores are coming in so low that Pay 'N Pak has been forced to reject them. The company's store in Fairbanks, Alaska would cost $3.6 million to build today, and is listed at $1.9 million. Offers have come in at $750,000.

"It's a buyers market," says Markley.

Other properties have been tough to sell because buyers can't get financing. The sale of a Pay 'N Pak store in Indio, California, has fallen through three times because of financing. It is now under contract for a fourth time.

All the company's real estate will be up for grabs at an auction in Seattle Tuesday. Any not sold at auction will revert to either landlords or banks which have liens on the stores.

The auctions for inventory start Monday. They will be held five times a day, for two weeks. Small items will be sold in batches, while large items will be sold alone. Markley expects everything to go.

"People will buy with the idea of bringing the stuff to swap meets," he says. "People are really looking for bargains in a recession."

Who is buying the leftovers? Markley says the customer base expands as the prices drop. A lot of people scouring the Kent store Wednesday were small contractors, looking to buy hardware for renovation projects, or to keep for later.

Other auctions will be held this month to sell furniture, fixtures and other equipment.

As for the company's employees, they have shrunk from 2,200 in June, to 900 now. Some have been hired by other home improvement chains, such as Ernst.

Markley is uncertain as to his future. The California native and his wife do not want to leave the Northwest

"We'll see this through until November."