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FORT WORTH, Texas -- FFP Partners LP, which operates and leases convenience store properties to FFP Marketing Co., yesterday rejected an unsolicited buyout offer from San Francisco-based financial services firm Sutter Holding Co Inc.

On Tuesday Sutter offered to buy all of the outstanding limited partnership units of FFP Partners for $2.00 per unit.

FFP Partners could have been targeted because of its recent poor performance. In June, as a result of accounting errors and weak fuel margins, FFP said it would report a net loss of more than $4.7 million for 2001 and a net loss of $1.5 million for the first quarter of 2002.

To stem mounting losses, the company unveiled a five-step plan to sell underperforming stores.

The Fort Worth, Texas-based chain became aware of bookkeeping errors earlier this year in the accounting records of one of its subsidiaries, the company said in a statement. (The company declined to identify the subsidiary.) The bookkeeping errors relate to FFP's 1999 and 2000 accounting for credit-card sales and fuel payables, and their resulting effect on the cost of motor fuel sold.

A subsequent analysis determined that the errors require a charge of more than $1.5 million to cover tax costs and penalties. As a result, FFP also said it would restate its financial statements for the two years.

FFP's woes didn't end there. At year-end 2001 and the end of the first quarter of 2002, it was not in compliance with the loan agreements for its long-term notes. The company has made all payments required under its loan documents and is seeking to obtain a waiver of non-compliance in the next two weeks.

The company said it expects that its revolving line of credit will be continued until the waiver is obtained, but there is "no assurance at this time, however, that the waivers will be obtained," the statement said. FFP President and COO Robert J. Byrnes declined to comment on the current financial situation.

What effect the botched accounting will have on FFP is unclear, but the company's line of credit is a crucial part of the its short-term strategy, especially as it relates to Chairman and CEO John Harvison's five-step plan to restore profitability.

The strategy includes converting company-operated stores to gas-only locations. "By converting a store to a gas-only store, we can often improve our profitability at that store in cases where our sublease income, motor fuel margin and reduction in direct store expenses exceeds the margin on merchandise sales and the commission paid on motor fuel sales," Harvison said. In the past two years, FFP has converted 60 locations to gas-only and is looking to convert another 50.