Furniture Brands International Inc, which is one of the largest manufacturers of furniture in the US, filed for bankruptcy with a deal to sell assets to Oaktree Capital Management, an investment firm, for $166 million. The ST Louis furniture maker that makes brands such as Broyhill, Drexel Heritage, Lane and Thomasville is selling all of its assets apart from its Lane business to the Los Angeles Based Oaktree but subject to higher bids at the bankruptcy auction. The company said that it would consider alternative bids for the Lane business and added that it had received several signs of interests from probable acquirers.
Furniture Brand has listed assets worth $546.7 million and a debt of $550.1 million in the initial petition that it filed with the US Bankruptcy Court. Just like the other domestic manufacturers of furniture, Furniture Brands had been hurting from the persistent effects of foreign competition and the recession. In 2012, the company had sales of around $1 billion which is roughly the half of the total sales it was making a decade ago. In the last two financial years, the company had a loss of $91 million and analysts are also predicting another loss in the year 2013. Furniture Brands has not made profit since 2006.
The debt of the company includes a $50 million term loan from the Sycamore Partners affiliate, Pathlight Capital. Earlier this year, Pathlight assigned the loan to Oaktree. Oaktree is seeking to use some of the debt from the company that it controls so as to purchase the assets from Furniture Brands. Besides serving as the lead bidder, or the stalking horse, for most of the assets of Furniture Brands, Oaktree is also offering $140 million in bankruptcy financing for the funding of the company’s business as it restructures under the Chapter 11 protection.
The company expects to complete the auctioning of the Lane in the coming 30 days and the selling of the other assets to Oaktree or to a rival bidder in a period of 140 days. In a statement, Ralph Scozzafava, the Chief Executive, said that the process of Bankruptcy is the best solution in long-term for the company to address its liquidity challenges. He added that Furniture Brands’ portfolios included some of the most respected brands in the industry and that the company was pleased to be entering into a partnership with Oaktree, a company that has a lot of experience in working with Furniture Brands and also other companies in the furniture industry.
The company’s existing lenders include Bank of America Corp, Wells Fargo & Co., and General Electric Co which agreed to provide the company with up to 200 million dollars in financing in an asset-based revolving loan some months ago. The company also owes over $200 million in pension obligations that are yet to be paid. At the end of 2012, the company employed 3,500 people overseas and another 5,600 people in the United States. In the month of May, Furniture Brands started a stock split of reverse one-to-seven so as not to be delisted. However, the move was not enough to prevent the slide of the stock and the company’s stock was trading at 24 cents per share in the afternoon of Monday.