Home Co. gets $10M credit line
By Clint Engel -- Furniture Today, March 17, 2002
DALLAS — A federal bankruptcy court has approved a $10 million debtor-in-possession line of credit to support The Home Co. — Fine Furniture Direct as it reorganizes under Chapter 11 protection.
The line would be provided by Wells Fargo Retail Finance, formerly known as Paragon Capital, and includes current debts to the lender. According to court documents, Wells Fargo is Home Co.'s largest secured creditor, owed $3.2 million.
The retailer operates upscale stores in San Marcos, Texas; Hagerstown, Md.; and Atlanta. It filed for Chapter 11 earlier this month, shortly after Mike McDonough was named president and chief executive officer, replacing Steve McKee, who left to join Henredon.
Following the filing, McDonough said the company had financing in place and expected a quick reorganization process with no plans for store closings.
According McDonough's affidavit in the case, the Home Co.'s financial difficulties were "due to continued operating losses, and a significant restriction in bank credit," halting the company's ability to buy new goods and deliver sold merchandise.
The Home Co. estimated that operations for the 30 days following the filing will result in a net loss of about $530,000, according to the affidavit.
In another filing, Home Co. told the court it needed to borrow up to $400,000 on an emergency basis to cover immediate payroll needs. It also said the company had negotiated "a sale of substantially all of it assets to a new entity" comprised in part of existing investors and a substantial new investor, but details on the new investor were not disclosed.
Home Co.'s largest equity holders are Northwood Ventures of Syosset, N.Y., and Prime Retail Furniture of Baltimore, with preferred equity stakes of 45.6% and 38.6%, respectively, according to a court document. Home Co. Chairman Marvin Traub has a 1.6% preferred stake, the document said.
The retailer required "up to an additional $1 million in order to get to a successful sale of the assets that will result, ultimately, in a substantial distribution to its unsecured creditors," according to the documents.
The list of unsecured creditors largely is a who's who of the industry's midpriced to high-end suppliers, including Lexington Home Brands, Henredon, Hickory Chair and Ferguson Copeland. Hickory Chair and Ferguson Copeland also are listed among Home Co.'s top five secured creditors along with Baker, Knap and Tubbs.
Unsecured claims for the 17 suppliers listed total more than $2.6 million, according to the filing. However, a handful of suppliers contacted indicated the listed claims exceeded actual debt by hundreds of thousands of dollars.
Lexington, for instance, is listed as the company's largest unsecured creditor, owed more than $461,000. But Jim Karriker, director of credit for the manufacturer, said the debt is more in the neighborhood of $275,000 and that he knows for certain Lexington is not Home Co.'s largest unsecured creditor.
Karriker said Home Co.'s bankruptcy appeared inevitable given the downturn in the economy and overall softening in the industry last year. The filing "was probably the right move for them at the right time, especially with the new financing, which I understand is in place," he said.
He said a meeting of creditors was to be held late last week in New York, where the unsecured creditors committee would be named. He has agreed to sit on the committee.
Furniture/Today estimates that Home Co. was on track to do about $30 million in sales last year, and the company had big plans for expanding into Chicago and Denver this year.
McDonough did not return phone calls.
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