Hendricks in Chapter 11
Boyles, Naja Rugs operating as usual
By Clint Engel -- Furniture Today, June 15, 2009
CONOVER, N.C. — Hendricks Furniture Group and sister company Classic Moving and Storage filed for Chapter 11 bankruptcy reorganization last week, the apparent victim of recession and overexpansion.
But the five-store Top 100 company said it expects business will continue as usual for its Boyles Distinctive Furniture, Naja Rugs and delivery units during the restructuring.
Hendricks said it has secured up to $2.5 million in debtor-in-possession financing through pre-petition lender BB&T and other lenders. It also said it has the support of “leading furniture manufacturers which assisted in developing a plan to supply goods to the company on normal credit and trade terms after the filing,” according to a release.
Indeed, court documents say creditor Sherrill Furniture is a participant in the DIP loan.
The company said it sought the support of BB&T and the manufacturers “to protect customer orders, deposits and confidence during the transition.”
In the petition filed in U.S. Bankruptcy Court for the Western District of North Carolina, Hendricks listed assets of more than $50 million and liabilities between $10 million and $50 million. Its 20 largest unsecured creditors are owed just under $4.4 million.
In an affidavit, Hendricks Founder and CEO Larry Hendricks paints a picture of a company that suffered first from overexpansion — including the acquisition of Norris Furniture & Interiors in Florida and the failed move into dedicated Drexel Heritage and Thomasville Home Furnishing stores — and then economic collapse.
The Drexel and Thomasville stores never met cash flow expectations.
“Essentially, the lack of increased sales from the expanded format did not provide the needed revenue to adequately cover the debtor's occupancy costs, and the costs of expansion increased the debtors' losses,” Hendricks said.
Efforts to capitalize on the company's distribution capabilities and infrastructure through expansion of the dedicated stores “not only failed to produce additional revenues, they distracted the company from its historically sound foundation of value-driven retailing in the Carolinas,” he added.
In a press release, Hendricks cited the failed non-Boyles retail divisions and “the subsequent obligations resulting from numerous store closings in an extremely distressed commercial real estate market” as events leading up to the filing.
“Although we made progress adapting to recent economic challenges, and had begun implementing a plan to restructure outside of Chapter 11, we had to file to do what was right for the creditors, employees and customers associated with our operations,” he said.
Hendricks spokesman Matt Ferebee said Hendricks was getting support from key vendors and lenders on a restructuring plan. He said that plan would have kept the retailer out of bankruptcy court, but the company came to an impasse with several landlords, primarily for the closed properties in Florida.
In the release, the company said that “successful lender and manufacturer negotiations prior to (the June 10) petition are expected to facilitate a speedy reorganization process.”
Hendricks Furniture Group is No. 46 on Furniture/Today's Top 100, ending 2008 with 12 stores and estimated sales of $140 million, down about 40% from 2007 as the retailer scaled back operations. It has closed additional stores this year and now operates five Boyles showrooms in North Carolina and South Carolina, and rug importer and distributor Naja Rugs. Those units have remained profitable at the store level, the company said.
At its peak, Hendricks and Norris had 34 stores in the Carolinas, Georgia and Florida doing more than $270 million a year, court documents said.
“While this filing changes the exact process of our restructuring, it doesn't change the goal we set almost a year ago: to refocus our company, and in particular our well-respected Boyles brand, on providing exciting products, services and values to loyal customers across the United States,” Hendricks said.
Industry companies listed among Hendricks' 20 largest unsecured creditors include:
Noori Liquidation Center, owed $587,309
Fine Furniture Design & Marketing, $359,846 (FFDM disputes the claim, saying it factors the account through BB&T and is not owed the money)
Michael Aziz Oriental Rugs, $329,995
Kingsdown, $260,695
Hooker Furniture, $227,428
Henkel-Harris, $225,638
Baker Furniture, $186,675
Sherrill Furniture, $185,641
Century Furniture, $147,845
Marge Carson Inc., $144,762
Stanley Furniture, $134,164
Hickory Furniture Mart, $122,084
Bashian Bros., $121,603
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UPDATE: Hendricks Furniture files for Chapter 11
Jun 11, 2009
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