K's Merchandise negotiating debt
By Clint Engel -- Furniture Today, June 5, 2006
Decatur, Ill. — A liquidation company in control of 17-store K's Merchandise here is negotiating with creditors in an effort to avoid bankruptcy and keep its doors open.
With stores in Illinois, Indiana, Iowa, Missouri and Kentucky, the promotional to midpriced K's has been in trouble at least since January, when then-lender LaSalle Retail Finance declared it in default of its lending facility.
K's was soliciting liquidation bids when an affiliate of liquidator Gordon Bros. Retail Partners stepped in, bought out LaSalle's debt position and acquired effective control over the retailer's equity, said Jay Indyke, an attorney representing an ad hoc committee of K's trade creditors.
Gordon Bros. has indicated that it intends to operate the company as a going concern and wants to work with creditors to keep K's out of bankruptcy court.
K's, which sells furniture as well as electronics, appliances, jewelry and other goods, has about 2,000 creditors, Indyke said.
Furniture/Today estimates the company did about $51 million in furniture sales last year out of about $200 million in total sales. Key industry suppliers include Lane, Ashley, H.T. Hackney, Berkline/BenchCraft, HomElegance, Bemco and Capital Bedding.
Trade creditors are owed about $14 million, Indyke said, though he wouldn't say what he's hoping to recover for them.
"I think the (latest) news is very positive right now," he said. In a May 15 letter to creditors, Indyke said the retailer and the creditors committee "have made significant progress in negotiations toward achieving an out-of-court restructuring agreement that the committee believes will maximize recoveries."
Asked if vendors were currently shipping the retailer, Indyke said he didn't know the specifics for each supplier.
"I understand (K's is) making some limited buys right now to fill in the gaps just to keep the company operating, but they're waiting for the deal to get done before going into further motion," he said.
Joe McLeish, a Gordon Bros. representative brought in to lead K's as CEO, referred questions to spokeswoman Susan Cronin, who declined to comment.
