D.C. retailer to close
Mastercraft Interiors files Chapter 11
By Clint Engel -- Furniture Today, June 5, 2006
Beltsville, Md. — High-end Washington-area retailer Mastercraft Interiors has filed for bankruptcy and will shut its five remaining stores, citing mounting debt, a liquidity crisis, poor sales, new competition and its inability to find a buyer for the business.
The former Top 100 company filed for Chapter 11 bankruptcy protection May 15, listing assets of $10.6 million and liabilities of $25.5 million.
Sales in 2005 were $45.3 million, down $5.2 million from the previous year, court documents said.
According to a list of 20 largest unsecured creditor claims, it owes top industry suppliers nearly $5 million, led by Stickley with two claims totaling nearly $1.8 million.
Also among the unsecured creditors is Dan Gomez, company President Douglas Gomez's brother and co-founder of the business, who left in 2004. He is the second-largest unsecured creditor with a $1.2 million claim related to a consulting contract.
The retailer has asked the bankruptcy court for approval to bring in liquidators Planned Furniture Promotions and Great American Group to sell inventory at four stores and the distribution center, and to approve a $225,000 break-up fee to Gordon Brothers Retail Partners, the original "stalking horse" bidder to run the liquidation.
The early court documents don't refer to Mastercraft's fifth store, M Boutique by Mastercraft Interiors, which opened in March in Leesburg, Va. But according to a spokeswoman, that small concept store closed Saturday. A store in Gaithersburg, Md., closed earlier this year.
"We are deeply saddened by this decision," Douglas Gomez said in a press release.
"In recent months we have experienced a dramatic drop in sales levels, which can be attributed to a variety of factors," he said. He cited weak consumer confidence, changing buying habits of Mastercraft customers and the "shifting dynamics" of the retail furniture business "with the expansion of new home furnishing concepts."
Great American President Jeff Yellen said Planned Furniture Promotions will run the going-out-of-business sales while Great American provides financial support. The sale is expected to be approved Thursday and would begin two to three weeks later, he said.
Yellen said the GOB sale will continue until all inventory is sold, estimating it would take four to six weeks. He estimated the debtor will receive $8 million to $10 million from the furniture liquidation, and could get more if other non-furniture assets are sold.
