Bankrupt HomeLife seeks $32M from vendors
By Larry Thomas -- Furniture Today, April 1, 2003
Wilmington, Del. — HomeLife Furniture, which ceased operations in late 2001, is seeking more than $32 million from its former vendors as the defunct retailer winds down its Chapter 11 bankruptcy case.
In a series of complaints or "preference actions" filed in recent weeks in U.S. Bankruptcy Court here, HomeLife contends it is owed the money because most of the vendors failed to live up to contracts signed with HomeLife about three months before it sought Chapter 11 protection in July 2001.
Preference actions allow companies operating under Chapter 11 to ask unsecured creditors to return a portion of the money paid to them in the 90-day period before the bankruptcy filing.
Vendors involved with the HomeLife case say such actions aren't unusual in Chapter 11 proceedings. But some are upset that HomeLife is seeking large amounts of money from companies to which the retailer already owes millions.
The largest preference claim, seeking $5.6 million, has been filed against Klaussner. The next two largest seek $3.9 million each from Berkline and Broyhill.
Other large claims have been filed against La-Z-Boy ($3.4 million), Universal ($3.3 million), BenchCraft ($3 million), Simmons ($2.5 million), Rowe ($2.1 million) and Lane ($1.7 million.)
All told, court documents show that preference claims have been filed against at least 22 vendors.
Any money HomeLife recovers from the claims would be used to help pay creditors when the company's liquidation is completed.
Dave Carpenter, director of credit for La-Z-Boy financial services in Greensboro, N.C., described the HomeLife case as a "triple whammy" for vendors who once sold furniture to the retailer.
"First, losing a customer to bankruptcy hurts the distribution channel. Second, we lose much or all of the receivable. Third, we get hit with preference claims," Carpenter said. "It really hurts the industry."
He and others involved with the case said it is unlikely HomeLife will get the entire amount it is seeking, but they acknowledged that under bankruptcy law, some of it probably will have to be paid back.
"They usually ask for the highest conceivable amount," said Lynn Chipperfield, senior vice president of Furniture Brands International, parent company of Lane and Broyhill. "But the final settlements are often significantly less than the amount they asked for."
HomeLife itself acknowledges it won't get the entire amount, noting in court filings that the "demand value" of the preference claims is $24.4 million.
Most of the complaints filed by HomeLife include a copy of a "preferred vendor agreement" that several manufacturers signed in April 2001. The agreements called for the producer to resume shipping goods in exchange for HomeLife's promise to pay all past due amounts within 150 days.
Although HomeLife's liquidation plan was confirmed by the bankruptcy court on March 6, Chipperfield and Carpenter said it probably will be late this year or early 2004 before all the claims are settled and assets are distributed to creditors.
Documents filed by HomeLife estimate the company will have $11 million to $17.1 million in assets to distribute to creditors. Of that amount, only $1.89 million to $8 million will be available to pay unsecured creditors' claims, which total more than $400 million. That means unsecured creditors will receive no more than two cents for every dollar owed by HomeLife.
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